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Coinage act of 1965
HEARINGS
BKFOSn TBEl
COMMITTEE ON BANETOG AM CTJIlRENCYj
HOUSE OP REPRKSEN TATTYE P
EIGHTY-NI'-TH i i .\i;|,'PSS
H.R. 8746
(Superseded by HJt. 8926)
A BILL TO PBOTIDB FOB TBB OOINAQB OF THB ONITED STATES
IONS 4, T, AND 9, 1H8
Printed for Uie lue of ttie ConunittM on BanklQe and Onrrency
MlO
•&h
X').%>
•^^
COINAGE ACT OF 1965
HEARINGS
BBFURE THE
COMMITTEE ON BANKING AND CURKENCT
HOUSE OF REPRESENTATIVES
EIGHTY-NINTH CONQEESS
FIRST SESSION
ON
H.R. 8746
(Superseded by H.R. 8926)
A BILL TO PROVIDE FOR THE COINAGE OF THE UNITED STATES
JUNE 4, 7, AND 8, 1965
Printed for the use of tbe Committee on Banking and Cunencr
D.8. QOVBHNMHNT PBINTINO OFBICB
WASHINGTON : 1865
89 3rasT XLJ n,q
09/92 93-006-00 /V.L'
a b, Google
COMMITTEE ON BANKING AND CUEHENCT
WRIGHT FATMAN, Teius, Oiairmaji
WILLIAM B. WIDNALL, New Jersey
PAUL A. FINO, New York
FLORENCE P. DWYER. New Jersey
BEYMOUE HALPERN. New Yotk
JAMES HARVEY, Mtchlsan
(BILLI BROCK, Tenn«ss«e
ABRAHAM J. MULTER, New York
WILLIAM A. BARRETT, PennaylTanla
LEONOR K. SULLIVAN, Missouri
HENRY S, REUSS, Wisconsin
THOMAB L. ASHLEY, Ohio
WILLIAM 8. MOORHEAD, Pennsylvania
ROBERT a. STEPHENS, JK., Georgia
EERNAND J. ST GERMAIN, RhodB iBlancl
HENEY B. QOMZALBZ, Teias
JOSEPH O. MINISH, New Jersey
CHAKLB8 L. WELTNEK, Georgia
RICHARD T. HANNA, Calitocnia
BERNARD F. 0RAB0W8EI, ConnecUcut
COMPTON I. WHITE, la.. Idaho
TOM B. OETTYS, Soutb CaroliuB
PADL H. TODD, JB., Michigan
RICHARD L. OTTINQEE, New York
BARLE CABELL, Teias
THOMAS C. McORATH, Jr., NeiT Jeise;
JOHN R. HANSEN, Iowa
FRANK ANNUNZIO, nilooU
BUBT L. TALCOTT. CalllOTiil!
DEL CLAW SON, Calilornia
ALBERT W. JOHNSON, Pennsylvania
J. WILLIAM STANTON, Obio
CHESTER L. MIZE, Kansat
Paul Nelson, Clert and Staff Dirtctar
ALViN Lee Moaae, Coaaiil
CnRTTS A. PaiNB, Cklef InciilisalitT
NOKMAN L. Holmes, Aiiitiant CfauiutI
Charles B. Holsteih, Profetaloaal Slaff Mtmbcr
OrHAK e. FlKB, Mtnorltv Staff MeratM
■dbyGOOgIC
CONTENTS
FlM
H. R. 8746. A bill to provide for the coinage of the United States 1
Message from the President of the United States relative to silver coint^e.. 3
Statement of —
Conte, Hon. Silvio O., a Representative in Congress from the State of
Massachuaetta 90
Fowler, Hon. Henry H., Secretary of the Treasury; accompanied by
Robert A, Wallace, AsBistant Secretary; Fred B. Smith, Actim;
General Counsel; Eva Adams, Director of the Mint: Frederick W,
Tate, Deputy Director of the Mint; and John H. Auten, Deputy
Director, Office of Financial Analysis 13, 67
Hardy, Robert M., Jr., chairman of the Silver Committee of the
American Mining Congress 94
Hosmer, Hon. Craig, a Representative in Congress from the State
of California 134
Morris, Joseph T., managing director, National Association of Photo-
graphic Manufacturers, Inc 112
Ramsey, Rear Adm. Donald J., U.S. Navy (retired), legislative counsel
for the Silver Users Association 101
Stevens, John B., executive vice president International Silver Co.,
and chairman of the executive committee of the Silver Users Asso-
ciation; accompanied by Frank Wemple, treasurer. Handy &
Harman; George R. Frankovich, executive director. Manufacturing
Jewelers & Silversmiths Association; Donald J. Ramsey, Washington
legislative counsel, Silver Users Association; Dr. Weldon Welffing,
Western Reserve University; also accompanied by Joseph T.
Morris on behalf of the National Association of Photographic
Manufacturers 99
Strauss, Simon D., vice president, American Smelting A Refinii^ Co 96
Welfling, Dr. Weldon, clmirman, Departments of Economics and
Banking and Finance, Western Reserve University, Cleveland,
Ohio 108
Additional information submitted to the committee by—
Annunsio, Hon. Frank:
Lennon, William F,, president Local 4, International Jewelry
Workers' Union, letter dated May 28, 1965 132
Spodick, Harry, general president and general secretary-treasurer,
International Jewelry Workers' Union, letter-statement 132
Fowler, Hon. Henry H.:
Answer to questions submitted by Mr. Patman 52
Answers to questions submitted by Mr. White 38
Clarification of figures used for silver consumed in coinage 84
Copper requirements based on fiscal year 1965 production,
table 77
Cost of copper in quarters (based on 1,000 pieces), table 77
Countries naving a silver coin — varying finenesses, table 45
Estimated free world silver consumption and production, 1949-64,
table - 14
Estimated production of coins, fiscal year 1966, table 86
Estimated production of new alloy coins, fiscal year 1966, table.. 50
Intrinsic value of present and proposed coins, table 30
Savings in seigniorage of oupronickel half dollars over silver clad
half dollars__ - 61
Scignioriige estimates, current coins and new alloy coins, table.. 31
■dbyGOOgIC
IV CONTENTS
Additional information submitt«d to the committee by — Continued
Patman, Hon. Wright:
Balier, Thomas F., executive vice president, American Bottlers of
Carbonated Beverages, the National Association of the Soft r««i
Drinlt Industry, Washingl^on, D.C., letter dated June 7, 1965.. 148
Bancroft, Richard K., statement of, on behalf of Che Columbium
for Coinage Association;. withdowment entitled "A Proposal
for Columbium Coinage -. i 148
Caverly, Gardner A,, executive vice president, the New England
Council, Boston, Mass., letter dated June 8, 1965 141
Chandler, Lester V., professor of economics, Princeton University,
letter dated June 4, 1965 _ 89
Clough, Howard W., vice president, sales, Quaker State Coca-Cola
Bottling Co., Pittsburgh, Pa., letter to Hon. William S. Moor-
head, dated April 6, 1965 146
Gallameau, J. B., Gallarneau Bros., Amarilto, Tex., letter dated
June 7, 1965- 147
Goldman, Aaron, president, Macke Vending Co., Washington,
D.C., letter with statement dated June 7, 1965 144
Harcourt, John T., letter dated June 4, 1965 55
Harlin, H. W., Jr., vice president. Southern Vendors, Inc., San
Antonio, Tex., letter dated June 8, 1965 148
Hungerford, Thomas B,, executive director of the National Auto-
matic Merchandising Association, Chicago, III., statement by. 55, 135
Kramer, Alex, Interstate United Corp., Lincolnwood, 111., letter-
Btatemeut dated June 4, 1965 146
Lewis, Marvin, owner. Key City Vending Co., Abilene, Tex.,
letter dated June 7, 1965 147
McDowell, Joseph E., president, Servomation Corp., New York,
N.Y., letter-statement 145
MiUman, Carl, president. Automatic Merchandising Corp., Mil-
waukee, Wis., telegram dated June 4, 1965 54
National Association of Photographic Manufacturers, Inc., state-
ment from 54
Odlin, Reno, president, the American Bankers Association, New
York, N.Y., letter with statement, dated June 7, 1965 138
O'Shaughnessy, Martin, administrator, food services. Radio Corp.
of America, Camden, N.J., letter dated June 7, 1965 147
Pferd, W., head, public telephone department. Bell Telephone
Laboratories, Inc., Murray Hill, N.J., letter dated June 8, 1965, 141
Rice, Theron J., lepslative action general manager. Chamber of
Commerce of the United Stat^, Washington, U.C, letter
dated June 8, 1965 - 140
Rosen, Harry, Allegheny Cigarette Service Co., Pittsburgh, Pa.,
letter to Hon. William 8. Moorhead, with statement, dated
April 21 1965 --- 142
Rosselot, Edward N., National Automatic Merchandising Associa-
tion, Smithtown, N.Y., letter to Hon. 0. G. Pike, dated April
30, 1965 143
Silver Users Association, statement on the President's coinage
message 54
Ramsey, Rear Adm. Donald J.:
Fowier, Hon. Henry H., Secretary of the Treasury, letter to,
dated May 10, 1965 107
Frankovicb, George R., executive director. Manufacturing
Jewelers A Silversmiths of America, Inc 120
Members of the Silver Users Association 106
Wemple, Francis H., treasurer of Handy & Harman, statement of, 117
Sullivan, Hon. lieonor K.:
Donahue, Thomas B., president and chief executive officer.
Universal Match Corp., telegram dated June 4, 1965 66
Sokol, Eric, executive vice president. National Rejectors, Inc.,
telegram dated June 5, 1S65 _ _ 57
■dbyGOOgIC
CONTENTS T
Appendix:
"A Program for a New and Modernized U.S. Coinage," a summary ^»<»
of the President's coinage program, dated June 3, 1965 159
"Treasury Staff Study of Silver and Coinage" 163
"A Study of AilovB Suitable for Use as United States Coinage," final
report prepared by the Battelle Memorial Institute 269
"Photography in the Economy — The Silver Image," by the National
Association of Photographic Manufacturera, Inc 381
"The Silver Market in 1964," 49th annual review compiled by Handy
A Harman __ 389
■dbyGOOgIC
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COINAGE ACT OF 1965
FRIDAY, JtfHB 4, 1985
House of REPRESBNTATivEa,
Committee on Banking and Cobrenct,
Washington, D.C.
The comniittee met, pursuant to notice, at 10 a.m., in room 2128,
Raybum House Office Building, Hon, Wright Fatman (chairman)
presiding.
Present: Representatives Patman, Ashl^, Moorhead, Stephens,
Weltner, Hanna, White, Gettys, Todd, Cabell, Hansen, Widnall,
Mrs. Dwyer, Harvey, Brock, Stanton, and Mize,
The Chairman. The committee will please come to order.
Today the committee considers H.R. 8746, a bill providing for the
coin^e needs of the United States.
(H!r. 8746 and the President's message follow:)
[H.R. S?», 8Sth Ooag., lat sen,]
A BILL To proTldB for the cDln^e or tbe Ualud Stales
Be U enacted by the Senate and House of Represenlatives of the United Stalet of
America in Congreia assembled, That this Act may be cited as "The CoiDage Act
of 1965".
TITLE I
Section 1. (a) The Secretary of the Treasury is authorized to cause to be
minted and issued the following coins:
(1) A half dollar or SCMsent piece which shall be composed of an alloy of eight
hundred parts of silver and two hundred parts of copper per each one thousand
parts by weight clad on a core of a silver-copper alloy of such fineness that the
composition of each coin shall be four hundred parts of silver and six hundred
parts of copper out of each one thousand parts by weight.
(2) A quarter dollar or 26-cent piece and a dime or lO-oent piece each of which
shall be composed of an alloy of 75 per centum of copper and 25 per centum of
nickel clad on a core of pure copper.
(b) The cladding alloy used for the outaide layers of such coins shall comprise
not less than 30 per centum of the weight of each coin. Such coins shtUl be of
the same diameter, lespectiveiy, aa the coins of the United States of corresponding
denominations current at the time of enactment of this Act,
(c) The weight of the half dollar provided for herein shall be eleven and fifty
one-hundredthB grama, of the quarter dollar five and sixty-seven one-hiindredthe
grams, and of the dime two and two hundred and sixty-eight one-thousandths
Sec. 2. Subject to the requirements of section 1, the methods of manufacture
of the coins therein provided, the wastage allowances, and the allowable deviations
in the metallic percentages and weights, shall bo as determined by the Secretary
of the Treasury. Such coins shall be aubiect to the laws pertaining to the designs
and inscriptions on coins of the United States.
Sec. 3. All coins minted pursuant to the provisions of this Act shall be legal
tender for all debts, public and private, public charges, taves, duties, and dues.
Sec. 4. Nothing herein contamed shall be deemM to prohibit the continued
minting of coins at the United States authorized by law at the time of enactment
of this Act.
■dbyGOOgIC
2 COINAGE ACT OF 1965
Sbc. 5. Whenever In the judgment of the Secretary of the Treasury such action
is necessary to protect the coinage of the United States, he is authorized under
such rules and regulations as he may prescribe to prohibit the exportation,
melting, or treating of coins of the United States.
Sec. 6. The Secretary of the Treasury is authorized to sell on such terms and
conditions as he may deem appropriate, at not less than the monetary value
thereof, aoy silver of' the United States in e;tce3s of that required to be held aa
reserves against silver certificates.
Sec. 7. The Secretary of the Treasury ia authorized and directed to purchase
at the price of Sl-26 per fine troy ounce silver mined after the date of enactment
of this Act from natural deposits in the United States or any place subject to
the jurisdiction thereof and tendered to a United States mint or assay office
within one year after the month in which the ore from which it is derived was
mined. The bullion fund provided by section 3526 of the Revised Statutes, as
amended (31 U.S.C. 335), may be used for such purchases.
Sec. 8. In order to expedite acquisition of essential equipment, patents, patent
rights, technical knowledge and assistance, metallic strip, and other materials
necessary to assure the prompt and continued availability of materials required
to produce an adequate supply of the coins provided for herein, tlie Secretary dt
the Treasury, during such period as he may deem necessary, is authorized, without
regard to the provisions of section 3528 of the Revised Statutes, as amended
(31 U.S.C. 340), or any other law, to enter into contracts upon such terms and
conditions as he may deem appropriate and in the public interest, for the acquisi-
tion or transportation of such equipment, patents, patent rights, techiucal
knowledge and assistance, metallic strip, or other materials.
Sec. 9. (a) The Act of September 3, 1964, Public Law 88-580, is amended to
read as follows: "Notwithstanding section 3517 of the Revised Statutes (31
U.S.C. 324), all coins minted from the datfl of enactment of this Act shall be
inscribed with the year of the coinage or issuance unless in the judgment of the
Secretary of the Treasury such inscription is likely to contribute to a shortage of
coins, in which case the particular coins involved may be inscriljed with the last
preceding year whose date has been inscribed on coins of the same denominations."
(b) Section 3550 of the Revised Statutes (31 U.S.C. 366) is repealed.
Sec. 10. The first sentence of section 3558 of the Revised Statutes, as amended
(31 U.8.C. 283), is amended to read as follows: "The business of the United States
assay office in San Francisco shall be in all respects similar to that of the assay
office of New York except that until such time as the Secretary of the Treasury
determines that the mints of the United States are adequate for the production of
ample supplies of coins, its facilities may be used for the production of any coins
of the United States authorized by law.
Sec. 11. Section 4 of the Act of August 20, 1963 (31 U.S.C. 294), is amended by
striking out "$30,000,000" and inserting in lieu thereof "$45,0OO,0Q0."
See. 12. Section 3 of the Act of December 18, 1942 (31 U.S.C. 317c), is amended
by striking out "minor" each plac« it appears in such section. Section 9 of the
Act of March 14, 1900 (31 U.S.C. 320), is hereby repealed.
Sec. 13. Section 3528 of the Revised SUtutes, as amended (31 U.S.C. 340), ia
amended (1) by striking out "this Act," in the first sentence and inserting in lieu
thereof "law,"; (2) by striking out "minor" each place it appears, in such section;
and (3) by striking out "$3,000,000" and inserting m lieu thereof "$30,000,000."
Sec. 14. 8ection485of the Actof June25, 1948 (18 U.S.C. 485), is amended by
striking out "the gold or silver coins" and inserting in lieu thereof "gold, silver,
silver- clad, or cupronick el-clad coins."
See. 15. The Secretary of the Treasury is authorized to issue such regulations
as he may deem necessary to carry out the provisions of this Act.
Sec. 16. Whoever knowingly violates any of the provisions of section 5 hereof
or of any order, rule, regulation or license issued pursuant thereto shall, upon
conviction, be fined not more than 810,000 or imprisoned not more than five
years, or both. In addition, there shall be forfeited to the United States any
coins exported, melted, or treated in violation of this Act of any order, rule,
regulation of license issued hereunder, or any metal resulting from such melting
or treating of coins. Such coins or metal may be seized and condemned by like
proceedings as those provided by law for the forfeiture, seizure or condemnation
of property imported into the United States contrary to law.
■dbyGOOgIC
COINAGE ACT OF 1D65.
TITLE II
Section 1. The President is hereby authorized to establish a Joint Commission
on the Coinage to be composed of the Secretary of the Treasury as Chairman;
the Secretary of Commerce; the Director of the Bureauof the Budget; the Director
of the Mint; the chairman and ranking minority member of the Senate Banking
and Currency Committee; the chairman and ranking minority member of the
House Banking and Currency Committee; one Member of the House of Represen-
tatives to be appointed by the Speaker; one Member of the Senate to be appointed
by the President of the Senate; and four public members to be appointed by the
Iresident, none of whom shall be associated or identified witb or representative of
any industry, group, business, or association directly interested as such in the
composition, characteristics, or production of the coinage of the United States.
Sec. 2. No public official or Member of Congreas serving as a member of the
Joint Commission shall continue to serve as such after he has ceased to hold the
office by virtue of which he became a member of the Joint Commission. Any
vacancy on the Joint Commission shall be filled by the choosing of a successor
member in the same manner as his predecessor.
Sec. 3. The Joint Commission shall study the progress made in the imple-
mentation of the coinage program cGtablished by this Act, and shall review from
time to time such matters as the needs of the economy for coins, the standards for
the coinage, technological developments in metallurgy and coin-selector devices,
the availability of various metals, renewed minting of the silver dollar, the time
when and circumstances under which the United States should cease to maintain
the price of silver, and other considerations relevant to the maintenance of an
adequate and stable coinage system. It shall, from time to time, give its advice
and recommendations with resjiect to these matters to the President, the Secre-
tary of the Treasury, and the Congress.
Sec. 4. There are authorized to be appropriated to remain available until ex-
pended, such amounts as may be necessary to carry out the purposes of this title.
[H. Doe. in, Setb Cong., Ist sees.
Message Fbou the PRssinENT or the United States Relative to Silvbb
COINAQB
To Che Congress of the United Slates:
From the early days of our independence the United States has used a system
of coinage fully equal in quantity and quality to all the tasks imposed upon it by
the Nation's "'"""^•"■na
.. B today using one of the few existing silver coinages in the world. Our
coins, in fact, are little changed from those first established by the Mint Act of
1793. For 173 years, we have maintained a system of abundant coins that wiUi
the exception of pennies and nickels is nearly pure silver.
The lone tradition of our silver coinage is one of the many marks of the extraor-
dinary stability of our political and economic system.
Continuity, however, is not the only characteristic of a great ration's coinage.
We should not heBilaie to change oar coinage to meet new and growing needs. I am,
therefore, proposing certain changes in our coiruige syatern — changes dictated by need —
which mil help Americans to carry out their daily transactions in the most efficieTit
tDOj* possible.
■There has been for some years a worldwide shortage of silver. The United
States is not exempt from that shortage—and we will not be exempt as it worsens.
Silner is becoming loo scarce for continued large-scale use in coins. To maintain
unchanged our high silver coinage in the face of this stark reality would only invite
a chronic and growing scarcity of coins.
We expect to use more than 300 million troy ounces— over 10,000 tons — of
silver for our coinage this year. Thai is far more than total new production of silver
expected in the entire free world Ikis year. Although we have a large stock of silver
on hand we cannot continue indefinitely to make coins of a high silver content^-in
the required quantity- — in the face of such an imbalance in the production of silver
and the demand for it.
We must take steps to maintain an adequate supply of coins, or face chaos in
the myriad transactions of our daily lite — from using pay telephones to parking in
a metered zone to providing our children with money for lunch at school.
■dbyGOOgIC
4 COINAGE ACT OF 1965
Tke legislalion I am eending to the Congresa with this message will truure a staMe
and dignified coinage, fully adequate in quantity and in ila specially designed technical
characteristics to the needs of our 20th century life. It can be maintained indefinitely,
however timch the demand for coin may grow.
Much as we all would prefer to retain the silver coins now in use, there ie no
practical alternative to a new coinage based on materials in adequate supply.
THE NEW COINAOB
I propose no change in either the penny or the nickel.
The new dime and the quarter — while remaining the same size and design as the
present dime and quarter — will be composite coins. They will have faces of the
same copper-nickel alloy used in our present 5-cent piece, bonded to a core of pure
copper. The new dime and quarter will, therefore, outwardly resemble the nickel,
except in size and design, but with the further distinction that their copper core
will give them a copper edge.
This type of coin was selected because, alone among practical alternatives, it
can be used together with our existing silver coins In the millions of coin-operated
devices that Americans new depend upon heavily for many kinds of food and other
Our new half dollar will be nearly indistinguishable in appearance from the
present half dollar.
It will continue to be made of silver and copper, but the silver content will be
reduced from 90 to 40 percent. It will be faced with an alloy of 80 percent silver
and 20 percent copper, bonded to a core of 21 percent silver and 79 percent copper.
The new half dollar will continue to be minted with the image of President Ken-
nedy, Its size will be unchanged.
No change in this famous old coin, or plans for additional production, are
iiroposed at this time. It is possible that implementation of the new coinage
egislation that I am proposing, greatly reducing the requirement for silver in
our subsidiary coinage, will actually make feasible the minting of additional silver
dollars in the future. Certainly, without this change in the silver content of the
subsidiary coinage, further minting of the silver dollar would be forever foreclosed.
It is our intention that the new coinage circulate side by side with our existing
coinage. We plan to continue the minting of our current silver coins while
the new coinage is brought into quantity production.
The new coins will be placed in circulation some time in 1966.
In terms of the present pattern of coin usage, adoption of the new coinage will
permit a saving of some 90 percent of the sflver we are now putting into coins
annually,
/ tvani to make U ahsolutely dear that these changes ■
effect on the purchasing ■power of our coins. The new _ . . ,,.
full face value for the paper currency of the United States. They will be accepted
by the Treasury and by the Federal Reserve banks for any of the financial obliga-
tions of the United States. The legislation I am proposing expressly recognizes
the new coins as legal tender.
It is of primary importance, of course, that our new coins be specifically de-
signed to serve our modern, technological society. In the early days of the
Republic, silver coins served well because the value of a coin could only be
measured by the value of the precious metal contained in it. For many decades
now the value of a particular coin has depended not on the value of the metal
in it, but on the face value of the coin. Today's coinage must primarily be
utilitarian. The new coinage will meet this requirement fully, while dispensing
with the idea that it contain precious metal.
It ia, above all, practical. It has been specifically designed to function, without
causing delays or disruptions of service, in coin-operated merchandising machines.
Furthermore, it is composed of materials low enough in value and readily
enough available to insure that we can have as many coins as we need.
The legislation I am proposing also contains these additional recommendations:
■dbyGOOgIC
COINAGE ACT OF 1986 5
OTHER AUTHORITY REQUESTED
Ftrai.— Aa a useful precautionary measure, I request standby authority to
institute controls over the melting and export of coins to assist the protectioa
of our existing and our new silver coinage.
Second. — I request authority to purchase domestically mined silver at not
lees than S1.25 per ounce.
Third. — I am asking for authority to reactivate minting operations temporarily
at the San Francisco Assay Office.
Fourik, — As a safeguard for assured availability of the new coinage, I am asking
for new contracting authority for the procurement of material and facilities
related to it.
Fifth. — I propose the establishment of a Joint Commission on the Coinage,
composed of certain Members of the Congress, the public, and the executive
branch of the Government, to report to me later the progress made in the installa-
tion of the new coinage and to review any new technological developments and
to suggest any further modifications which may be needed.
WHY THE SILVER CONTENT OP THE COINAGE MDST BE REDUCED AT THIS SESSION
These recommendations for revision of our silver coinage rest upon extensive
study of the silver situation, and of alternatives to our present coinage, by both
governmental and private specialists. The Treasury Department's comprehen-
sive report, known as the Treasury Staff Silver and Coinage Study, is being released
today as background to my recommendations. Its principal finding was that the
supply of silver in the free world has become progreaeively incompalible with the
maintenance of silver in all our STibsidiary coins.
On the average, in the 5 years from 1949 through 1953, new silver production
in the free world amounted to about 175 million troy ounces per year, while con-
sumption amounted to more than 235 million ounces. There was an avert^^o
deficit in those 5 postwar years of more than 60 million ounces of silver per year.
In the latest completed 5 years, 1960 tlu-ough 1964, free world consumption
of silver has averaged 410 million ounces annually, but new production has
averaged a little less than 210 million ounces a year. The result has been an
average annual deficit of about 200 million ounces. That is three times the
average annual deficit in the 5 years from 1949 through 1953.
If no silver at all had been used for coinage there would have been a deficit in
new production in free world silver during the last 5 years averaging over 40
million troy ounces, or some 1,370 tons, a year.
The gap between the production of silver and Eilver consumption is continuing
to increase. In 1964 the silver production deficit swelled to over 300 million
ounces — half again the 1963 figure. And in 1964, the use of silver in coinage,
and the use of silver for the arts and industry of the free world were each — taken
separately — greater than new production.
TTiere is no dependable or likely prospect that neio, economically workable sources
Of silver may be found that coidd appreciably narrow the gap between silver supply
and demand. The optimistic outlook is for an increase in production of about
20 percent over the next 4 years. This would be of little help. Further, because
silver is produced chiefly as a byproduct of the mining of copper, lead, and zine,
even a very large increase in the price of silver would not stimulate silver produc-
tion sufficiently to change the outlook.
Short of controls that are undesirable in a peacetime free society, there is no
way to diminish the bounding growth of private demand for silver for use in
jewelry, silverware, photographic film, and industrial processes. The one part
of the demand for silver that can be reduced is governmental demand for use in
coinage.
Most free world countries no longer use silver in their coins. A few — as we now
propose — continue to make limited use of it. It is true that U.S. coinage does
not currently depend upon new silver production, because for many years we
have supplied silver tor our coinage out of large Treasury stocks, which still
amount to 1 billion troy ounces.
But — and this is the ctth of the mallei — at the present pace, this stock cannot
last even as much as 3 years. We would then be shorn of our ability to maintain the
ccinage, and, if there were no edternalive to out present silver coinage, the Nation
would be faced u:ith a chronic coin shortage. That is why definitive action is necessary
at this session of the Congress.
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COINAOE ACT OF 1905
PKOmcTIOH c
It is necessary for the U.S. Government to have large stocks of silver in addition
to the quantity needed for coinage.
We need these stocks because our silver coins in circulation must be protected
from boarding or destruction. Protection of the silver coinage will continue to
be a necessity since we plan for it to continue to circulate alongside the new coins.
Our silver coins are protected by the tact that the Government stands ready to
sell silver bullion from its stocks at $1.29 a troy ounce. This keeps the price of
silver, as a commodity, from rising above the face value of our coins. This, in
turn, makes hoarding or melting of the silver coinage unprofitable.
/( is a» additional proUciion for ike existing coinage thai I am requesting standbg
authority to institute controls over the melting, treating, or export of U.S. coins.
It may be asked why we seek standby control authority since we retain a Urge
stock of silver with which to protect our silver coins through operations in the
silver market.
The answer is clear. Given the magnitudes by which demand for silver is
outrunning new production, we must consider the possibility, however unlikely,
that the silver stock we possess could itself require the support and protection
that would be afforded by authority to forbid melting and export of our coins.
We believe our present stocks of silver to be adequate, once the large present
drains from coinage are greatly reduced, to meet any foreseeable requirements
for an indefinite period. However, prompt action on a neie coinage will kelp us
protect Ike silver coinage by freeing our sAver resenie* for redemption of silver cer-
tificales at $1.19 per ounce. Thus, u>e can assure that no incentive ivill be created
for hoarding our present coins in anticipation of a higher price for their silver content.
There is the opposite, although in all likelihood short-run, possibility that a
fall in the price of stiver might result from the enactment of this legislation largely
removing silver from our subsidiary coin. /( is for the purpose of protecting silver
producers from a precipitate drop in Ifte price of silver resulting from the action of
the Oovemmenl that I am requesting authority for the Secretary of the Treasury to
purchase any newly mined domestic silver offered to kim, at the price of S1.S5 per
troy ounce.
THS SAK FRANCISCO ASBAI OFFICE
Coinage operations at the San Francisco Mint were ended in 195.5. Legislation
converting the mint to the San Francisco Assay Oifice was passed in 1962. As
Krt of our efforts to overcome the coin shortage of the past year, coin blanks
ve been cut and annealed at the San Francisco Assay Office. Present law
forbids full minting there. However, we will temporarily need the faciUties of
this plant to move into large quantity production of the new coinage and to
continue production of existing coins until enough new small money is made to
make certain we have adequate supplies. Consequently, I am asking for authority
to reactivate minting operations at San Francisco on a temporary basis.
A new, fully modem mint is to be built in Philadelphia. However, it cannot
be completed and in operation before late 1967. It is our expectation that when
the new Philadelphia Mint's capacity is added to that of the Denver Mint, our
coinage requirements can be met efficiently and economically. Consequently,
no more than temporary authority to mint coins in San Francisco is recommended
in the draft legislation I am sending to you.
WHY COMPOSITE COINS ARB RECOUUENDBD
We have no choice but to eliminate silver, for the most part, from our subsidiary
coinage. The question was; What would be the best alternative? After very
thorough consideration of all aspects of this highlj^ complex problem, we have
settled upon the two types of composite, or clad, coins I have already described.
These are 10- and 25-cent pieces with cupronickel alloy faces bonded to a solid
copper core, and a new half dollar with outer and inner layers of differing silver-
copper alloys.
This type of coin was found to be necessary if the new coinage is to be com-
patible with the existing silver coinage in all the 12 million coin-operated devices
in use in the United States.
The convenience of using coins in automatic merchandising and service devices
Is a fact that, like the coins in our pockets and in our store tills, we take for granted.
But if our coinage were suddenly to be such that it would not work in coin-
operated devices, the public would be subjected to very great inconvenience and
serious losses would occur to business with harmful effects upon employment.
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COINAGE ACT OF 1965 7
The ftutomatio merchandising Induetrir la a large and growiog part of our
national economy. Last year, $33^ billion wortii of conaumer items were sold
through 3H million of these machiaea. On more than 30 biilion separate occa-
sions a consumer made a purchase by putting a coin in a machine. In growing
nmnbers, factories, hospitals, and other places now depend upon automatic
vending for the service of goods. A miJIion and a half people now rely upon
coin-controlled vending for at least one meal a day. The use of ooin-operated
devices is expanding rapidly, not only in merchandise vending, but also in a
number of other services.
Six miUion of our coin-operated devices, including nearly all vending macliinee,
IWiVe selectors set to reject coins or iTnitations of coins that do not have the
electrical properties of our existing silver money. Highly selective rejectors are
a necessity in. these machines if they are to be a low-cost source of food and other
goods and services. Otherwise, fraudulent use would soon make them costly.
The sensors ia these machines are set to accept or reject coins on the basis of
the electrical properties of our traditional coins, which have a high proportion
of silver. To be compatible in operation with our existing coinage, therefore, our
new coins must duplicate the electric properties of a coin that is 90-percent silver.
No single acceptable metal or alloy does so. The composite coins, made of layers
of differing metals and alloys, that I am asking the Congress to approve, are
coins made to order to duplicate the electrical properties of coins with a liigh
silver content. They are the only practical alt^natives we liave discovered to
our present coinage.
Selectors exist that can liandle coins with the widely varying electrical properties
of, say, nearly pure silver and nearly pure nickel. But tliat is not enough. Wtiea
the selectors are set to accept coins with greatly differing electrical properties, the
selectivity of the mechanism declines and they will accept wrong coins and
imitations. Unless the coins in use have very similar electricfJ properties, the
coin-operated mactiinea tiecome subject to a iiigh degree of fraudulent use. Tliis
would be costly to all concerned.
The future may bring selectors of a different kind able to accept coins of widely
varying electrictd properties while at the same time rejecting imitations and
wrong coins. They are not available now. When and if they become available,
our new coinage will work in them. On the other hand, if we now chose an
incompatible coinage, there would be delays and interruptions lasting a year to
3 years in the services of these machines. This would impose heavy inconven-
iences upon the public and would cause business and employment losses in a large
and growing industry.
In view of these considerations of public interest, we have concluded that our
new coinage must without fail be able to carry out the technical merchandising
functions of a modem coinage, working alongside our existing silver coinage. The
new coim that I ain recommending to you do this, and do it meti, becaute they v>er»
specifically designed for the taek.
The new ha& doOar was designed with the Strong desire in mind of many
Americans to retain some silver in our everyday coinage. We beUeve that by
eliminating silver from use in the dime and the quarter, we will have enough
silver to carry out market operations in protection of our existing silver coinage —
and to make a half dollar of 40 percent silver content. It is clear and unmistakable
that we would not tiave enough silver to extend this to the dime and quarter;
they are heavily used, indispensable coins that we must have at all times ia
large quantity. We are convinced that we can include a 40-percent Mlver half
dollar in the new coinage, but we cannot safely go beyond that. As a precaution,
we intend to concentrate at first on getting out large quantities of the new quarter
and dime before we embark upon quantity production of the new half dollar.
THE JOINT COMMISSION ON THE COINAQB
We believe the recommendations being made for a new coinage ore sound and
durable and in the best public interest. However, the installation of a new
coinage is a matter so intimately affecting the life of every citizen, and so delicately
related to the Nation's commerce, that it is impossible to be certain in advance
that all problems have been foreseen, even by such a long and arduous process of
research as has gone into the selection of the proposed new coins.
Consequently, I am including among my recommendations the proposal for a
Joint Commission on the Coinage. It will be composed of the four officers of
the executive branch most directly concerned with matters affected by the coinage
— the Secretary of the Treasury, the Secretary of Commerce, the Director of the
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8 COINAGE ACT OF 1965
Budget Bureau and the Director of the Mint; of four members representing the
public interest, to be appointed by the President; of the chairmen and ranking
members of the Banking and Currency Committees of the House and the Senate;
of one Memt)er each from the two Ilouaee of the Congress, to be appointed by the
Vice President and the Speaker of the House. The Commission will be appointed
soon after the new coinage is issued. It will study such matters as new technologi-
cal developments, the supply of various metals, and the future of the silver dollar.
It will report as to the time and circumstances in which the Government should
cease to maintain the price of silver. It will be directed to advise the ft-eaident,
the Congress, and the Secretary of the Treasury on the results of its studies.
THE COINAOB CUKKBNT AND PSOSPECTIVB
I am pleased to report to the Congress substantial progress toward overcoming
the coin shortage the Nation has been experiencing. Greatly increased minting
has eliminated the shortage of pennies and of nickels. We are still somewhat on
the short side of the demand for dimes and quarters, but this deficit is rapidly being
overtaken. A severe shortage of the half dollar continues, due to the popularity
of the new 50-oent pieces bearing the image of President Kennedy.
I want to emphasize that we will continue to make the existing coins while the
new ones come into full production, and that we contemplate side-by-side circula-
tion of the old and new coins tor the indefinite future. There is no reason for
hoarding the silver coinage we noio use, because there is no reason for it to disappear.
We are gearing up for maximum production of the new coins as soon as they are
authorized by the Congress. Supply of the materials for them is assured. Both
copper and nickel are economical and available in North America. Their usage
in coins will not add enough l*o overall employment of these metals to create
Bupply or price problems.
In the first year after new coins are authorized, we expect to make 3M billion
pieces of the new sulisidiary coins. That is a billion and a half more pieces than
will be made of the corresponding silver coins in the current fiscal year.
In the second year after authorization of the new coinage, we expect to be able
to double the first year's output of the new coins, reaching a production total of
7 billion pieces.
We expect iu this way to avoid any new coin shortage in the transition to pro-
duction of the new coins, and within a period of less than 3 years to reach a point
at which we could, if necessary, meet total coinage needs out of production of the
/ am satisfied, Ihal taking into account all of Ike various factors involved in lki»
complex pToblem, the recommendations thai I am making to you are sound and right.
Your early and favorable action upon the proposed legtslalton iailt make it possible
to produce and issue to the public a coinage (hat leill be acceptable, provide the maximum
convenience, and serve aU the purposes — financial and technical-^of modem com-
merce. In considering this problem the needs of the economy and the conv^iience
of the public have been placed ahead of all other considerations. They are the factors
that have resulted in my recommendations to the Congress. I urge their approviA at
&e earliest possible date.
Ltndon B. Johnson.
The White House, June S, I9S5.
Dbaft of Ad uiNi strati on Bill
A BILL To provide lor tbe coinage D( th« United States
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled. That this Act may be cited as "The Coinage Act
of 1965."
TITLE I
Section I. (a> The Secretary of the Treasury is authorized to cause to he
minted and issued the following coins:
(1) A half dollar or fifty-cent piece which shall be composed of an alloy
of 800 parts of silver and 200 parts of copper per each one thousand parts
by weight clad on a core of a silver-copper alloy of such fineness that the
composition of each coin shall be 400 parts of silver and 600 parts of copper
out of each 1000 parts by weight.
(2) A quarter dollar or twenty-five-cent piece and a dime or ten-cent piece
each of which shall be composed of an alloy of 75 percent of copper and 25
percent of nickel clad on a core of pure copper.
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COIN AGE ACT OF 1966 9
(b) The cladding alloy used for the outside layers of such coins shall comprise
not less than thirty percent of the weight of each coin. Such coins shall be of the
same diameter, respectively, as the coins of ,the United States of corresponding
denominations current at the time of enactment of this Act.
(c) The weight of the half dollar provided for herein ahal] be 11.50 granifl, of the
quarter dollar 5.67 grams and of the dime 2.268 grams.
Sec. 2. Subject to the requirements of section 1, the methods of manufacture of
the coins therein provided, the wastage allowances, and the allowable deviations
in the metallic percentages and weights, shall be as determined by the Secretary
of the Treasury. Such coins shall be subject to the laws pertaining to the designs
and inscriptions on coins of the United States.
Sec. 3. All coins minted pursuant to the provisions of this Act shaU be legal
tender for all debts, public and private, public charges, taxes, duties and dues.
Sec. 4. Nothing herein contained siiall be deemed to prohibit the continued
minting of coins of the United States authorized by law at the time of enactment
of this Act.
Sec. 5. Whenever in the judgment of the Secretary of the Treasury such action
is necessary to protect the coinage of the United States, he is authorized under
such rules and regulations as he may prescribe to prohibit the exportation, melting
or treating of coins of the United States.
Sec. 6. The Secretary of the Treasury is authorized to sell on such f«rmB and
conditions as he may deem appropriate, at not less than the monetary value
thereof, any silver of the United States in excess of that required to be held as
at the price of $1.25 per fine troy ounce silver mined after the date of enactment
of this Act from natural deposits in the United Statos or any place subject to the
jurisdiction thereof and tendered to a United States mint or assay office within
one year after the month in which the ore from which it is derived was mined.
The bullion fund provided by section 3626 of the Revised Statutes, as amended
(31 U.S.C. 335), may be used for such purchases.
Sec. 8. In order to expedite acquisition of essential equipment, patents, patent
rights, technical knowledge and assistance, metallic strip and other materials
necessary to assure the prompt and continued availability of materials required
to produce an adequate supply of the coins provided for herein, the Secretary of
(31 U.S.C. 340), or any other law, to enter into contracts upon such terms and
conditions as he may deem appropriate and in the public interest, for the acqui-
sition or transportation of such equipment, patents, patent rights, technical
knowledge and assistance, metallic strip, or other materials.
Sec. 9. (a) The Act of September 3, 1964, Public Law 88-580, is amended to
read as follows:
"Notwithstanding section 3517 of the Revised Statutes (31 U.S.C. 324), all
coins minted from the date of enactment of this Act shall be inscribed with the
year of the coinage or issuance unless in the judgment of the Secretary of the
Treasury such inscription is likely to contribute to a shortage of coins, in which
case the particular coins involved may be inscribed with the last preceding year
whose dale has been inscribed on coins of the same denominations."
(b) Section 3550 of the Revised Statutes (31 U.S.C. 366) is repealed.
Sec. 10. The first sentence of section 3558 of the Revised Statutes, as amended
(31 U.S.C. 283), is amended to read as follows;
"The business of the Unit«d States assay office in San Francisco shall be in all
respects similar to that of the assay office of New York except that until such
time as the Secretary of the Treasury determines that the mints of the United
States are adequate for the production of ample supplies of coins, its facilities may
be used for the production of any coins of the United States authorized by law.
Sec. 11. Section 4 of the Act of August 20, 1993 (31 U.S.C. 294), is amended by
striking out "$30,000,000" and inserting in lieu thereof "$45,000,000".
Sec. 12. Section 3 of the Act of December 18, 1942 (31 U.S.C. 317c), is amended
by striking out "minor" each place it appears in such section. Section 9 of the
Act of March 14, 1900 (31 U.S.C. 320), is hereby repealed.
Sec. 13. Section 3528 of the Revised Statutes, as amended (31 U.S.C. 340),
B amended (1) by striking out "this Act," in the first sentence and inserting in
lieu thereof ''law,"; (2) by striking out "minor" each place it appears in such
section; and (3) by striking out "$3,000,000" and inserting in lieu thereof
"$30,000,000".
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10 COINAGE ACT OF 1065
Sec. 14. Section 485 of the Act of June 25, 1948 {18 U.6.C. 485), is amended
by striking out "the gold or silver coins" and ineerting in lieu thereof "gold,
silver, silver-clad, or cupronickel-clad coins".
Sec. 15, The Secretary of the Treasury ia authorized to issue such regulations
as he may deem necessary to carry out the provisions of this Act.
Sec. 16. Whoever knowingly violates any of the provisions of section 5 hereof
or of any order, rule, regulation, or license issued pursuant thereto shall, upon
conviction, be fined not more than $10,000 or imprisoned not more than five
years, or both. In addition, there shall be forfeited to the United States any
coins exported, melted, or treated in violation of this Act or any order, rule,
regulation or license issued hereunder, or any metal resulting from such melting
or treating of coins. Such coins or metal may be seized and condemned by like
proceedings as those provided by law for the forfeiture, seizure, or condemnation
of property imported into the United States contrary to law,
TITLE II
Section 1. The President is hereby authorized to establish a Joint Commission
on the Coinage to be composed of the Secretary of the Treasury as Chairman;
the Secretary of Commerce; the Director of the Bureau of the Budget; the Director
of the Mint; the chairman and ranking minority member of the Senate Banking
and Currency Committee; the chairman and ranking minority member of the
House Banking and Currency Committee; one Member of the House of Repre*
sentativea to be appointed by the Speaker; one Member of the Senate to be
appointed by the President of the Senate; and four public members to be appointed
by the President, none of whom shall be associated or identified with or repre-
sentative of any industry, group, business, or association directly interested as
such in the composition, characteristics, or production of the coinage of the
United States.
Sec. 2. No public official or Memiwr of Congress serving as a member of the
Joint Commission shall continue to serve as such after he has ceased to hold
the office by virtue of which he became a member of the Joint Commission. Any
vacancy on the Joint Commission shall be filled by the choosing of a successor
member in the same manner as his predece^or.
Sec. 3. The Joint Commission shall study the progress made in the iraplemen-
• tation of the coinage program established by this Act, and shall review from time
to time such matters as the needs of the economy for coins, the standards for the
coinage, technological developments in metallurgy and coin-selector devices, the
availability of various metals, renewed minting of the silver dollar, the time when
and circumstances under which the United States should cease to maintain the
price of silver, and other considerations relevant to the maintenance of an adequate
and stable coinage system. It shall, from time to time, give its advice and recom-
mendations with respect to these matters to the President, the Secretary of the
Treasury, and the Congress.
Sec. 4. Ttiere are authorized to be appropriated, to remain available until
expended, such amounts as may be necessary to carry out the purposes of this title.
Section-bt-Section Analtsis or the Bill
Tide I
Section 1 authorizes the minting and issuance of a new series of coins in denomi-
nations of 10, 25, and 50 cents which will be manufactured from composite metals
containing three layers. In the case of the 50-cent piece, the outside or cladding
layers would be composed of an alloy of 80 percent silver and 20 percent copper
and the core of a silver-copper alloy of such fineness that the overall composition
of each coin would be 40 percent silver and 60 percent copper. The 10- and 25-
cent coins would consist of cupronickel (75 percent copper, 25 percent nickel)
clad on a core of pure copper. Section 1 also prescribes the proportionate amounts
of core and cladding alloys in the coins, the weight of each coin and that such
coins are to be of the same diameter as the current coins of the United States of
corresponding denominations.
Section 2 authori2es the Secretary of the Treasury to determine the methods
of manufacture of the new coins, the wastage allowances, and the allowable
deviations in the metallic percentages and weights. It provides also that such
coins shall be subject to existing laws pertaining to the designs and inscriptions
on U.S. coins.
Section 3 provides that the coins shall be legal tender. While existing statutes
governing legal tender are broad enough to cover the new coins, an express
provision in the new bill ia deemed desirable to eliminate any possible doubt.
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COINAGE ACT OF 1965 11
Section 4 provides continuin); authority for the coinage of coins authorized by
provisions of existing law. This will enable the continued production of present
coinage to the extent necessary to assure the production of ample supplies of
coins during the period of tratisition to the new coinage.
Section 5 gives standby authority to the Secretary of the Treasury to prohibit
the exportation, melting, or treating of U.S. coins when necessary to protect the
coinage.
Section 6 provides for sales by the Treasury of silver in excess of that required
to be held against silver certificates at prices not less than the monetary value.
This will clarify the authority of the Treasury to make sales of such excess silver
under appropriate conditions.
Section 7 authorizes the purchase of newly mined domestic silver by the Treas-
ury at the price of $1.25 per fine troy ounce. This will protect silver-producing
industries against any precipitate drop in the price of their product which might
result from the change in U.S. coinage alloy. Silver purchased under this provi-
sion can be used in coinage at values not less than SI. 29 plus per fine troy ounce.
Section 7 also authorizes the use of the bullion fund for the purchase of silver.
Section 8 authorizes the Secretary, tor as long as he deems it necessary, to
procure, on terms deemed appropriate and in the public interest, any materials,
technical knowledge and assistance, equipment, patents, transportation services,
etc., necessary to assure prompt and continued availabilitv of materials required
for the new coinage without regard to any laws requiring advertising and competi-
tive bidding or imposing other restrictions on the negotiation of contracts for the
purchase of property by the Government.
Section 9 directs that coins minted after enactment of this act aiiall bear the year
of the coinage orissuance unless the Secretary of the Treasury determines that this
is likely to contribute to a coin shortage. In this event, the particular coins
involved may be inscribed with the last preceding year whose date appeared on
coins of these denominations. This section would also repeal an obsolete pro-
vision of law requiring that the obverse working dies at each mint be destroyed
at the end of each year.
Section 10 authorizes use of the San Francisco Assav Office for coinage on a
temporary basis until such time as the Secretary of the "Treasury determines that
the facilities at the mints are adequate for the production of ample supplies of
coins. It is anticipated that during the period of transition to the new coinage
the mints' production load will be partioularly heavy and additional facilities will
be needed. Use of the San Francisco Assay Office is the most expeditious way of
providing these. Section 10 also authorizes permanent use of the San Francisco
Assay Office for refining gold and silver bullion. This will also contribute to the
efficiency of operations at the mints and assay offices.
Section 11 mcreases the maximum amount authorized to be appropriated for
the construction of the new mint at Philadelphia from $30 million to $45 million.
Additional funds will be necessary to provide equipment and facilities for the new
coinage.
Section 12 will authorize and provide financing for the melting of any worn
and unourrent U.S. coins, including the new cupronickel-elad and silver-clad
coins, received in the Treasury and the sale or recoinage of the resulting metals.
The section also repeals an act which requires recoinage of all worn and un current
subsidiary silver coins received in the Treasury.
Section 13 authorizes use of the minor-coinage metal fund and the minor-coinage
profit fund (to be renamed the coinage-metal fund and the coinage-profit fund)
for the purchase of metals for the coins provided tor in the act and for certain
expenses incurred in such coinage ; namely, the wastage and cost of distribution of
the coins. It also raises the amount available in the coinage-metal fund from
S3 million to $30 million. This increase in amount is necessary because after
enactment of the bill this fund will be used tor the purchase of metals used in
coinage of alt denominations whereas at the present time it is used only tor metals
for I- and 5-cent coins.
Section 14 amends one of the counterfeiting laws so as to make it applicable to
the new cupronickel and silver-clad coins on the same terms and conditions as it
is now applicable to the subsidiary silver coins. It is not necessary to amend
any of the other counterfeiting laws since these will be applicable by their terms
Section 15 is a general provision authorizing the Secretary of the Treasury to
issue regulations that may be necessary to carry out the provisions of the act.
Section 16 provide penalties for violations of any regulations issued under
eeotion 6 of the act, prohibiting the export, melting, or treating of U.S. coins.
S5— 2
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COINAGE ACT OF 1965
Titk II
Section 1 provides for the establishment of a Joint Commission on the Coinagei
composed of tour executive officials, six Members of Congress, and four pubUc
members to be appointed by the iVesident. The public members shall not be
representatives of any group having a direct interest in coinage.
Section 2 provides that the executive and congressional members shall cease to
serve on the Joint Commission after leaving their public office, and provides for
the filling of vacancies on the Commission.
Section 3 provides that the Joint CommisEion shall study the progress made in
the implementation of the coinage program established by the act. It shall
review and give its advice and recommendations from time to time to the Congress,
President, and the Secretary of the Treasury on such matters as the needs of the
economy for coins, the standards for the coinage, technological development in
metallurgy, the availability of various metals, renewed minting of the silver
dollar, the time when and circumstances under which the Unitedf States should
cease to maintain the price of silver, and other considerations relevant to the
maintenance of an adequate and stable coinage system.
Section 4 authorizes the appropriation of such amounts as may be necessary
for the expense of the Joint Commission.
The Chairman. The Congress and the American people have
known for some time that legislation would be proposed to solve the
several complex problems relating to our coin situation. This prob-
lem has been the subject of study by the U.S. Treasury for the past 2
years. The legislation before us today calling for changes in our
coinage will, if enacted, provide the needed coins of all denominations
to oil the wheels of commerce and trade.
Under this l^islation, industries such as defense, jewelry, film,
and others, which use substantial quantities of silver, will be assured
of continued availability of this useful metal. The vending machine
industry, which today constitutes an important element in our
economy employing many people, will be assured that coins, both the
new ones as proposed and, of course, the existing coins will be operative
in existing coin-operated devices.
Also, tie silver-mining industry, both its owners and the miners
that provide us with silver, will, under this legislation, be encouraged
to expand exploration and research and development activities to
produce the greatest amount of this increasingly scarce mineral.
And, finalfy, the pubHc, under this legislation, will need have no
fear whatsoever of the value of these new coins; for, regardless of the
metal used in making our coinage, the full faith and credit of the
United States stands oehind them all.
We are opening our hearings with the Honorable Henry Fowler,
making his first appearance before oiir committee since his appoint-
ment as Secretary of the Treasury.
Secretary Fowler, over the years, has appeared frequently before
this committee during the distinguished career he has achieved in
a number of top posts in Government, particularly as Defense Mo-
bilizer during the Korean war, and as Under Secretary of the Treasury
in the early days of the Kennedy administration.
We are pleased to have Mr. Fowler make his first appearance before
us as Secretary on a matter of such importance to the United States
as the composition of the coinage.
Secretary Fowler is accompanied by Assistant Secretary Robert
A. Wallace, who also has contributed much to the proposal now
under consideration and who also is a distinguished public servant.
Digitized byGoOgle
COCKAQE ACT OF lOeS 13
We are glad to have you gentlemen with us today.
Mr. Secretary, if you wUl identify yourself for the record, and
also those accompanying you, it would be appreciated, and you may
proceed in your own way.
STATEMENT OF HON. HENKT H. FOWLEB, SECRETARY OF THE
TBEASURT; ACCOMPANIED BY ROBERT A. WALLACE, ASSISTANT
SECRETARY; FRED B. SMITH, ACTING GENERAL COUNSEL;
FREDERICK W. TATE, DEPUTY DIRECTOR OF THE MUTT; AND
JOHN H. AUTEN, DEPUTY DIRECTOR, OFFICE OF FINANCIAL
ANALYSIS
Secretary Fowleh. Thank you, Mr, Chairman.
My name is Henry H. Fowler, I am Secretary of the Treasury.
. On my left is Assistant Secretary of the Treasury Robert Wallace;
Mr. Frederick Tate, who is the Deputy Director of the mint on his
left; Mr. Fred Smith, the Acting General Counsel for the Treasury
Department on his left; and on my right, Mr. John Auten, Deputy
Director of the Office of Financial Analysis of the Treasury Depart-
ment.
Thank you, Mr. Chairman, for this opportunity to appear before
your committee today in support of the legislation the President has
recommended for a new and efficient U.S. coinage.
Wg particularly appreciate the promptness with which this hearing
has been called following the submission of the President's mess^e,
because time is an Important element in the matter with which we
have to deal.
We are recommending a change in the coinage because there is
not enough available silver to assure the continued minting of our
traditional 90-percent silver coins for the years aheud in the quantities
necessary to meet our rapidly increasing coinage requirements.
As much as all of us would prefer to keep our old and handsome
silver coinage, there is no choice but to reduce drastically our heavy
dependence upon silver for this purpose for one simple reason: the
demand for silver has far outrun supply.
The only option open to us in this matter, without gravely risking
the national interest in adequate and plentiful coinage, has been choice
of what new material to use in the place of silver.
The new coinage the President has recommended that you authorize
has all the attributes of a strong and stable coin system, and that,
moreover, it is fully modem, and specifically engineered to carry out
efficiently all the tasks that American merchandising of our day
requires.
The new coins recommended to you will provide uninterrupted
service as a medium of exchange. They can be made without the
necessity of further change for a long period ahead. These coins are
made of materials for which there is assured access. They can be
minted without undue difficulty and at moderate cost. They can
be used across the counter — and m all of the 12 million coin-operated
devices in use in the United States — side by side with our existing
silver coins.
There is, of course, no substitute for the appearance of silver. In
one of the three new coins we are asking authority to make — the
Digitized byGoOgle
14 OOIHACm tXfr OF 1D66
half dollar — the beauty of the "noble metal" is preserved intact,
aIthoup;h the actual silver content is much reduced. The proposed
new dime and quarter are a departure from the tradition of mver,
but thev are coins that have a distinctively modem appearance and
that wiD serve us well because they can protect us from future coin
shortages. The fact that they are not silver, but are composite coins
made of a nickel alloy bonded to a copper core, is a change that re-
quires getting used to. But I think the ruddy edge resmting from
tneir copper core gives these coins a character we wm come not only
to accept, but to value.
Now, for a few comments as to the underlying need for this legisla-
tion, which is simply the shrinkage of silver supplies.
In the statement there is a table attached which presents the
silver supply situation as briefly and succinctly as possible. I have
taken it from our "Treasury Staff Study of Silver and Coinage,"
which I understand is or wiU be made available to the members of
the committee.
(The table referred to follows:)
EatimaUdfree world silver consumption and prodiiction, 1949-64
[MiUlona ot fine troy ouncesl
■S!S'
Use-Coinage demand
Total
diicthui
On»9
defldt
Deftrit.
Unltsd
Stales
Foreign
world
Total
ti<m
as
1W9-5S. averages
KilSS:-.:::
163
s
i
i
i
K
«2
SS
i
171
E
M
1
SS
S5
67
NoT«.— A troy ounce equals 480 grains, an avQlrdapoL! pound equals 7.000 Kralns, a ZpnoO-poniid ton
equata 14,1)00,000 gralDSi hence, 1,000,000.000 troy ounces (480,000,000,000 grains) equals S4,2g« Ions.
Bodicg: "Treasoi; Stall study oISQverand Coinage," pi. lit, table 1, figures rounded.
Secretary Fowlek. The table shows a steadily worsening of our
silver supplies, from a small deficiency of production in the early
postwar years to a slightly biffier deficiency in the next S-year period,
a much larger inadequacy in toe 5 years from 1957 through )961, and
to a boundmg growth of the deficiency in the last 2 calendar years.
Actual market deficits are smaller than the difference between total
consumption and new production because the United States meets its
coinage needs for silver out of its stocks. These, however, are being
depleted at a rate which cannot be permitted to continue indefinitely.
It is notable that in 1964 eacli major type of usage — the use of
silver by industry and the arts, and use of silver for coinage — taken
se^rately, was greater than new supply.
This is the crux of the matter.
There is simply not enough silver appearing on the market to
continue to satisfy the demand for it in the foreseeable future.
There is no dependable — or, for that matter, likely — prospect, m
the opinion of experts both inside and outside the Treasury, of new
economically workable sources of silver that would appreciably
narrow the gap between sUver supply and demand. In fact, opti-
DigitizcdbyGoOgle
COmAQE ACT OP 1966 15
mistic projectiona envision an increase of no more than 20 percent over
the next 4 years. Projected increases in consumption are at least
equally as great.
This standoff between future increases of production and consump-
tion in a situation where deficits are already very heavy could not
change the basic conclusion that use of silver in our coinage must be
very sharply curtailed. Also, because silver is produced chi^y as
a byproduct of the mining of copper, lead, and zinc, even a very great
increase in the price of silver would not stimulate new production
sufficiently to change the situation.
Most free world countries have long since ended or nearly ended the
use of silver in their coinage. Except for Canada and Switzerland,
those countries still using silver coins make only limited use of it, in
one or two "prestige" coins, as we now propose to do with the new
haK dollar. As seen in the table, in the early postwEir years, the
United States accounted for less than half of total free world employ-
ment of silver for coias, but at present we use more than three-quarters
of all silver put into coins in the free world.
We have no choice but to make a lai^e reduction of silver in the
coinage, and no choice but to do so now. We have on hand some 1
billion ounces of silver in the Treasury stock. At current rates of mint
production we are using silver for coinage at the rate of 300 million
ounces a year; and for the redemption of silver certificates at 120
million ounces a year.
Even should demands upon our stock increase no more, it is clear
that at present rates of use we can expect to exhaust our resources in
2 or 3 years. This gives us enough tune to shift to a new coinage if
we act promptly.
As to the basic requirement for the new coinage system — in arriving
at our recommendations for new coinage alloys our overriding con-
sideration, Mr. Chairman, was the necessity of continuing at all times
to provide an adequate means of exchange and of avoiding any dis-
ruption of commerce. Experience shows all too clearly that, under
modem conditions, the essential medium of exchange function is im-
periled if a subsidiary coinage alloy threatens to become more valuable
as a commodity than as money.
The Treasury's own staff study, and that of the Battelle Memorial
Institute, establish certain other criteria which an acceptable coinage
alloy should have, beyond the basic criterion of efficiency in its func-
tion as a medium of exchange. These include, the degree to which a
coinage material lends itself to being minted into coins which would
be durable in use; its acceptability to the public; ease and sureness of
production; cost and availability of raw materials, and counterfeiting
potential.
An additional criterion is a critical factor for a modem American
coinage. Present-day coins should perform not only as a mediiun of
exchange, but also as tecimical merchandising instruments, in use in
coin-operated vending and service machines.
As to the need for compatibihty of old and new coinage: The
new coins should be made compatible with the existing comage in
use today in coin-operated devices, particularly in coin-operated
vending machines. This is one of the most desirable characteristics
of a modem coinage, and a characteristic fully met by the President's
proposal. If the new coint^e could not be used in these mechanisms.
Digitized byGoOgle
16 COINAGE ACT OF 1966
the public would be subjected to ^at inconvenience, and trade and
commerce in many sectors of distnbution hara,ssed and handicapped.
If the new coins were not compatible, two alternatives would be
presented, both of them undesirable from the point of view of the
public atlai^e:
(1) The vending machines would have to be shut down until new
sensing and rejecting devices could be installed; or
(2) Their devices for sensing and rejecting wrong coins and slugs
would have to be deliberately circumvented, exposing the machines
to a high rate of fraud.
In the case of merchandise vending machines alone — that is, not
including such service devices as pay telephones and coin-operated
laundries — over $3!^ billion worth of goods were dispensed to con-
sumers last year, in over 30 billion separate transactions.
These vending machines are equipped with sensitive selectors,
which reject wrong coins, slugs, foreign coins, and the like. Highly
selective rejectors are necessary if coin machines are to be low-cost
supply points for foods and for many other kinds of goods, available
by night and by day, in out-of-the-way as well as accessible places,
such as the modern factory, which we have all observed.
Approximately half of the 12 million coin-operated machines
in the United States are equipped with sensors that accept or reject
coins on the basis of the electrical properties of our traditional high
silver content coinage. To be compatible in operation with our
existing coinage, our new coins must duplicate the electrical char-
acteristics of a coin with high silver content. The coins we are -
recommending to you reproduce precisely the electrical properties of
coins with high silver content. Moreover, they are made of the only
materials that do so, satisfactorily, among the practical alternatives.
Any other course would subject the public to extensive inconvenience.
If noncompatible materials are used, there will have to be an inter-
regnum while new selectors are developed and brought into mass
production that are —
(1) capable of handling coins of high silver content together with
coins that do not have the electrical properties of nearly pure silver,
and
(2) at the same time capable of rejecting sli^s, low value foreign
coins and coins of wrong denominations. Selectors exist that can
handle coins with a wide range of electrical properties. But when
they are set for a wide range, their selectivity falls, and they become
subject to fraudulent use.
During the 1 to 3 years that development, manufacture and in-
stallation of a new kind of sensor would take, the public would not
be able to use the incompatible new coinage in the 6 million of our
coin-operated devices, chiefly those vending merchandise, fitted with
sensitive selectors. The choice of the coins recommended here avoids
these difficulties and the attendant interferences with trade and
commerce.
Now, to outline briefly the recommendations that appear in the
proposed legislation:
Section 1 of the proposed legislation describes the metallic content
of the proposed new coinage:
■dbyGOOgIC
COINAGE ACT OF 1965 17
A. THE MINOB COINAGE
The penny and the 5-cent piece: No change is proposed.
B. THE BUBSIDIARY COINAGE
1. The dime and the quarter: It is proposed that silver be eliminated
from the dime and quarter. Instead, they should be composite, or
dad, coins, faced with an alloy of 75 percent copper and 25 percent
nickel — the same cupronickel alloy used throughout the 5-cent
piece — bonded to a core of pure copper.
2. The half dollar: It is proposed that the 50-cent piece should also
be a composite coin, with the silver content reduced from the present
90 percent to a new ratio of 40 percent. It would be faced with an
alloy of 80 percent silver and 20 percent copper, clad on core alloy of
approximately 21 percent silver and 79 percent copper.
3. The Silver Dollar: No change is proposed. Authority to make
a silver dollar of the same weight and fineness — 412.5 grains, 90
percent silver — made at various times since the act of 1837, would be
continued. However, we would not plan to mint any new coins of
this denomination at the present time.
Section 2 provides that the new coins would be subject to the
current laws as to design and inscription.
With respect to these coins, I would like to emphasize the following
points, some of them aheady discussed:
1. It is our intention that the existing silver coinage should circu-
late side by side with the new coinage, indefinitely.
2. The proposed new dime and quarter would have a copper-
colored edge, due to the use of a pure copper core.
3. The new coinage would meet the exacting technical requirements
necessary to permit it to be used in the coin-operated devices now in
use in the United States, including those fitted with rejectors set to
refuse coins or imitations of coins that do not have the electrical
properties of our current silver coins.
4. We plan to place the new coins in circulation some time in 1966.
5. The new couis would be of the same size and design as present
coins of the same denomination. They would be sightly hghter in
weight.
Section 3 provides specific recognition of the new coins as legal
tender.
Section 4 provides for continued minting of the existing coins as
needed until production of the new coinage is adequate, continuing
without change the standard silver dollar.
Section 5 provides for standby authority for the Secretary of the
Treasury to prohibit the melting, exportation, or treating of U.S. sil-
ver coins.
Section 6 provides for sales by the Treasury of silver in excess of
what is needed to back silver certificates, at a price not less than the
monetary value of silver.
Section 7 would authorize the Treasury to purchase newly mined
domestic silver at $1.25 per fine troy ounce.
Section 8 provides for legal authority to procure the materials and
technical assistance^ equipment and patents needed to make the new
coinage in the required quantity.
Digitized byGoOgle
18 COmAOE ACT OF 1965
Section 9 provides authority to continue dating the new coins as of
the first year they are issued.
Section 10 would authorize the temporajy use of the San Francisco
Assay Office for the minting of new coins, and would authorize the
conversion of that facility for the refining of precious metals, if
necessary, after it is no longer needed for coin production.
Sections 11 to 16: An act requiring recomage of all worn and
uncurrent subsidiary silver received in the Treasury is repesJed ; the
minor-coinage metal fund is renamed the coinage-metal fund, and the
minor-coinage profit fund is renamed the coinage-profit fund, and the
amount available in the coinage-metal fund is raised from $3 million
to $30 million; expenditure of not more than $15 million is authorized
for additional mint facilities to accommodate manufacturing require-
ments of the new materials; the counterfeiting laws are amended to
cover the new coinage; the issuance of necessary regulations by the
Secretary of the Treasury under the proposed act is authorized; and
penalties are provided for violations of regulations issued under
section 5.
A separate title of the proposed l^slation of great significance
provides for the establishment of a Joint Commission of the Coinage
after the new coinage is issued.
The Commission would be composed of the Secretary of the Treas-
ury, the Secretary of Commerce, the Director of the Bureau of the
Budget, the Director of the Mint, of four public members, not repre-
sentatives of interest groups, appointed by the President, of the chair-
men and ranking minority members of the House and the Senate
Banking and Currency Committees, and of two other congression^
members, one appointed by the Speaker of the House and one by the
President of the Senate.
The function of the Commission would be to study the progress
of the implementation of the new coinage program, new technological
developments that may intervene, the supply of various metals,
and the future of the silver dollar. It would report as to the time and
circumstances in which the Government should cease to maintain the
price of silver, if that decision should seem desirable. And it would
advise the President, the Congress, and the Secretary of the Treasury
on the results of its studies.
As to the protection of existing coinage:
The continued use of coins that are 90 percent silver also requires
protection of this high silver content coinage from hoarding or destruc-
tion.
There is no reason for hoarding of coins in anticipation of a coin
shortage. We expect no such shortage during the period when we are
installing the new coinage. We can, if necessary, step up production
enough to replace completely, in less than 3 years, the entne body of
existing silver coinage while at the same time keeping up with the
normal growth of com demand.
We can defend the existing silver coinage against the second possible
danger — the threat of destruction by melting them for then* silver
content. To make certain that the silver coinage is not destroyed
in this manner, it will be necessary for the Treasury to protect the
monetary value of our silver coinage by supplying silver to the market
upon demand at the present monetary pnce of silver of $1.29 plus
per troy ounce. The Treasury has been doing this since 1963 by
exchanges of silver buDion against silver certificates.
Digitized byGoOgIC
CMKAGE ACT OP 1868 19
The value of the silver in our existing coinage, as ealver, would
exceed the face value of the coins if the price were allowed to rise
above a so-called melting point of these coins of $1.38 per ounce.
We hold the price of $1.29 plus per ounce by standing ready freely to
redeem silver certificates in silver at this price. The prudent course
is to maintain the price of silver at its present level.
It is as additional protection for existing silver coinage, which
includes the silver dollar, that we recommend asking for standby
authority to institute controls over the melting, treating or export
of U.S. coins, practices not now forbidden by law.
We believe strongly that suggestions for more extensive controls
would operate against our best mterests.
As to the sufficiency of coinage supply:
As you know, we nave recently experienced a shortage of coins.
I am happy to say that as a result of intensive production efforts
on the part of the Mint the supply of coins in circulation and in
inventory in the Federal Reserve banks is improved. There is no
longer a shortage of the 1-cent and 5-cent pieces.
We still have a problem with dimes and quarters supply but sub-
stantial improvements have been made. The shortage of half dollars
b still severe.
In view of the continuing shortages of high denomination coins
and the uncertainties inevitable during the changeover period, we Eire
gearing up for maximum production of the new coins as soon as the
legislation is passed. In the first year after enactment, we expect
to make at least 3H billion of the new subsidiary coins— a billion and
a half more than we will make of the silver coins in fiscal 1965. This
is more than double the production in fiscal 1964 and four or five
times what we would consider as a normal year's production of silver
coins. In the second year after enactment we would expect to make
well over 7 billion of the new coins, doubling production ^ain.
As to the silver dollar:
The silver dollar will remain as an authorized coin of the United
States, at 90 percent fineness. This is a central element in our pro-
gram for holding the price of silver to its present level for the protec-
tion of our existing subsidiary silver coin. The future of the silver
dollar can better be decided when the Joint Commission of the Coinage,
which we have recommended, can take a look at the world's silver
supply and demand situation and other relevant factors and make
its recommendations. At that time, the facts can lai^ely govern the
decision on the issue of the future of the silver dollar.
Now, as to maintaining some silver in the subsidiary coinage:
We have considered it desirable to maintain some silver in our
subsidiary coinage. It was to this end that the new silver half dollar
was designed. The new composite coin reduced the silver content of
the half dollar from 90 to 40 percent. It nevertheless retains without
readily apparent differences, the aspect and ring of a coin with high
silver content, although it is slightly lighter than the present half
dollar. It is to be of the same design as the present half doUar, that
is, bearing the image of the late President Kennedy.
One reason for retaining some silver in our coinage is a desire to
continue the 173-year-old tradition of American silver coinage. In-
clusion of a 40 percent silver half dollar is as far as we can safely go
to satisfy this tradition. We expect that, barring unforeseen changes
Digitized byGoOgle
20 COINAGE ACT OF 1965
in industrial demand for 8ilver, we will have adequate silver to make
this one coin in normal amounts for an indefinite period. After the
new coins are in full production it should require no more than 15
million ounces a year — less than 5 percent oi expected 1965 silver
consumption for coins. One reason for continuing this particular
coin is the fact that we could, if unforeseen difBculties developed, do
without the half dollar temporarily. It can be replaced in use by
two quarters.
In conclusion, a change in our coinage is unavoidable. We have
reviewed very carefully the results of all of the studies which have
been made on this subject. We are satisfied, that, taking into account
all of the various factors involved in this problem, our recommenda-
tions for the new coinage are sound proposals that will, if enacted,
provide the United States with a dependable, technically perfect, and
distinctive coinage that can be produced in whatever quantity desired.
It is a coinage that, I emphasize, "will perform not only across the
counter, but will also carry out fully and without interruption its
function as a technical merchandising instrument." This is abso-
lutely necessary for the public interest. I, therefore, strongly urge
approval of these recommendations and that they be enacted into
law at the earliest possible date.
Thank you, Mr. Chairman.
The Chairman. Thank you, Mr. Secretary,
We are not asking for "souvenirs," but I wonder if you have any
"samples" available that the members of the committee may inspect.
Secretary Fowler. Yes; I think it would be appropriate to view
them. Assistant Secretary Wallace has a display tor that purpose.
The Chairman. All right, show them to the members, if you would,
please, starting right here with Mr. Widnall.
It is not true, Mr. Secretary, that we would not debase our coinage
at all by this bill because the monetary value attributed to silver is
merely that accorded by the people's elected representatives?
Secretary Fowler. That is correct, air.
The Chairman. Isn't it really the full faith and credit of the
United States that makes silver attractive to Americans?
Secretary Fowler. That is correct.
The Chairman. In other words it is the dollar that supports silver
and gold as well. What is really meaningful is official recognition as
a medium of exchange by the Government, whether one speaks of
paper, metal, or glass beads.
Now, legal tender is, of course, something that everyone must
accept in payment of debts and taxes.
Secretary Fowler. Yes, sir.
The Chairman. And related matters. So these coins, regardless
of the commoditv value of the metal that is in them, will have the
stamp of the United States recognizing that each coin is legal tender
for the payment of all debts, public and private.
Secretary Fowler. Yes, sir.
The Chairman. What broader definition of "legal tender" is em-
braced—it has been a long time since I looked into it — besides debts
and taxes? I know one fellow who owed a considerable amount as
alimony, about $1,500, and he took it all m pennies and delivered it
to his former wife.
■dbyGOOgIC
COtNAOE ACT OF 1963
Secretary Fowler. The provision would read as follo^ra:
Section 3, as proposed:
The Chairman. In other words, if they have something owing to
them, they are compelled by law to accept these coins?
Secretary Fowler. Correct.
The Chaibman. Because these coins are legal tender.
Secretary Fowler, Correct.
The Chairman. And that embraces not only taxes of the U.S.
Government, income taxes and other different forms of taxes, but it
includes debts of all kinds, pubUc debts, private debts, including local
ta.\es in the 3,072 counties, the States, the cities, and other p^tical
subdivisions.
Secretary Fowler. Correct. I think it would be worth under-
scoring, in the light of your comments and questions, Mr. Chairman,
that the President, in his message, mentioned the changes involved
here will have no effect on the purchasing power of the coinage as we
know it. The new ones will be exchanged at full face value for the
paper currency of the United States, They will be accepted, in
addition to the acceptance you have indicated, by the Treasury and
the Federal Reserve banks for any of the financial obHgations of the
United States, and section 3 expressly recognizes the coins as legal
tender.
We are aware, of course, that in the early days of the Republic,
silver coins served well because the value of the coin at that time
almost had to be measured by the content of the precious metal
contained in it- But for many decades now, the value of the coin
has depended on its face value and not on the value of the metal in it.
We thmk that today the primary test of coinage must be primarily
utilitarian. And indeed the difficulty that we are in today is that the
value of the metal in our sUver coins is so closely approaching their
face value that, should it exceed that, the coinage would be no longer
the medium of exchange that we want it to be.
The Chairman. The way I view it, when that situation is reached,
at that time only is money a commodity.
Secretary Fowler. That is right.
The Chairman. Money was spoken of as a commodity when, of
course, we used gold and silver, and it was really a commodity. But
now I do not think it is correct to say that money generally is a
commodity, because it is not- Paper money is not a commodity — ■
can't be.
Secretary Fowler. Purely a medium of exchange.
The Chairman. So when the people decide through their elected
representatives that the silver content of their coins be reduced, this
in no way enhances the value of presently circulating coins or the
silver that they contain.
For these reasons and other provisions in this bill, there is no point
whatever in hoarding or melting the older coins by the public. There
is nothing to be gained by this, and it will only cause another coin
shortage. The new coins would he just as valuable in every way as
our existing coinage, no more, no less.
Secretary Fowler. Right, sir.
■dbyGOOgIC
22 v,v - C9IN4()E) AOr OF 1965
The Chairman, Mr. Ashley?
Mr. Ashley. Thank you, Mr. Chairman.
Mr. Secretary, you say that about 300 million ounces of silver ia
being used annually at the present time for the minting of coins. Is
that correct?
Secretary Fowler. Well, last year in the United States, in 1964,
we used 203 million ounces, and this year — let's take the fiscal year
1965, that ia just closing now — we will have used 268 million ounces
for coinage purposes.
Mr, Ashley. Can you tell me how that breaks down in terms of
dimes, quarters, half dollars?
Secretary Fowler. By far the predominant usage of silver cur-
rently ia in the dime and the 25-cent piece. For the fiscal year 1965,
out of the total of 268 million ounces, we are using 73.8 million ounces
for the 10-cent piece, 125 million ounces for the 25-cent piece, and
69.3 million ounces for the 50-cent piece.
Mr. Ashley. Thank you.
Now, how much for me 10-cent piece, again, sir?
Secretary Fowler. 73.8 million ounces.
Mr. Ashley. Can you tell us or can it be supplied for the record
the number of dimes, quarters, half dollars, and dollars that are
presently in circulation?
Secretary Fowler. The amount in circulation or the amount
produced ?
Mr, Ashley. The amount in circulation is what I would be inter-
ested in. I am interested in what is being introduced on an annual
basis relative to the total supply in circulation.
Secretary Fowleh. By the end of this year, this calendar year,
1965, our estimate is that there will be in drculation 1,233 million
50-cent pieces.
Of the quarters, 3,317 million,
or the dimes, 7,844 million.
Of the 5-cent pieces, 7,308 miUion.
Of the pennies, 40,645 million.
Total, if you are interested, Congressman Ashley, would be 60,347
million pieces of coins.
Mr, Ashley. In your statement, Mr. Secretary, you indicated
Secretary Fowler, I might qualify that in one respect. These are
our estimates, and our estimates are based on an estimated 25-year
Ufe of coins.
Mr. Ashley. Thank you, sir.
In your statement you indicated a present world deficit, excluding
U.S. coinage, of 132— this would be for 1964 — 132 milhon ounces.
Secretary Fowler. That is right — excluding the U.S. coinage.
Mr. Ashley. Now, do we have a net deficit in this country in terms
of our demand picture?
Secretary Fowlee. In terms of production?
Mr. Ashley. Of production versus supply.
Secretary Fowler. Oh, yes. We are a very heavy importer.
And also. Congressman Ashley, we must take into account the fact
that today our needs in the United States are being met, not only out
of domestic production — which is relatively not a very substantial
factor — but out of imports and out of our own Treasury stocks.
Mr. Ashley. That is the thing that interests me, because our
stocks are not limitless, by any manner of means.
Digitized byGoOgle
COINAGE ACT OF 1965 23
Secretary Fowler. They certainly are not. They are down now
to roughly a billion ounces.
Mr. Ashley. So in 1964 if the deficit, excluding U.S. coinaee de-
mand, was 132 million ounces, what would be the U.S. deficit, excluding
U.S. coinage demand that would have to be met from our stocks and
from imports abroad?
Secretary Fowler. That will take a little computation. But it is
ve^ easily obtained on an approximate basis.
If you mclude U.S. coinage, and U.S. industrial use, we had a gross
deficit in 1964 of almost 300 million ounces in the United States.
Now, if you take out coinage, that deficit would be almost 100
million ounces.
Mr. Ashley. It is your feeling, I take it, it is your belief that this
deficit would be met by imports from abroad without recourse to the
(loremment's stock of silver?
Secretary Fowler. No. I think there would have to be continual
recourse to the Government stock of silver to meet this deficit.
Mr. Ashley. But if we have this limited stock, which indeed we do,
of only a billion ounces or so, why do we then continue the production
of half dollars with even 40 percent silver?
Secretary Fowleh. Because of the considerations that enter into
maintaining at least one prestige coin as a part of our tradition, be-
cause the estimated silver use for a ver? adequate annual production
rate of this coin would be only 15 million ounces, and because the
ultimate solution of what I would call the industrial and arts problem
of the use of silver is not going to be solved for the long-term indefinite
future by whether we do or whether we don't utilize this 15 million
ounces of silver a year for our own coinage.
Obviously, one of the problems that the proposed Joint Commission
on Coinage will focus on — should it be authorized, when and if it is
convened — will be the question of how long and under what circum-
stances the United States should continue in the silver business, so
to speak. There will be an occasion, at that time, I think, for more
careful and orderly review — ^away from the atmosphere of a coinage
problem or of a comage crisis — to consider the action most necessary
in the light of the supply and demand situation as it exists at that
time: Wnether there are technolo^cal developments in which some
of the industrial users of silver can find adequate substitute materials,
whether reclaiming processoj and whatnot that can be developed will
avert any serious dislocation when and if for the U.S. Government to
go out of the silver business. There are a whole range of problems,
which it seemed to us would be untimely now for the Congress to try
to resolve in connection with this current problem.
We wanted to focus fm- this legislation on the decisions that you
and your colleagues would have to make regarding the coinage
problem, and in a sense to defer until a more normal supply-demand
situation^ — ^apart from the atmosphere of a coinage problem, when
you might say the commercial and the industrial future of silver
could be looked at in a somewhat separate context.
Mr. Ashley. Thank you, Mr. Secretary.
The Chaibman. Mr. Widnall?
Mr. WiDKALL. Thank you, Mr. Chairman.
Good morning, Mr. Fowler.
I would like to say this at the outset, Mr. Chairman. I feel in
■view of the importance of this legislation, that members who received
Digitized byGoOgle
24 COmAOB ACT OF 1965
very short notice for the meeting today and who were unable to attend
should have an opportunity to question the Secretary of the Treasury.
I would hope that he would be recalled at a date in the near future so
that that opportunity could be afforded them. I think this applies to
both sides of the aisle.
The Chairman, We will have Mr. Fowler back Monday. We
discussed it with him, and he and Mr. Wallace can be with us on
Monday, Mr. Widnall.
Mr. Widnall. Thank you, Mr, Chairman.
Mr. Fowler, in view of the fact that there is something in this bill
for everybody, the users, the producers, tlie vending machine operators,
and the like, couldn't this properly be characterized as a consensus coin-
age, which is a term you used in discussing it with the press yesterday?
Secretary Fowler. I didn't coin that phrase, to use a pun, but it is
a very acceptable one from my point of view, sir.
Mr. Widnall. Wben this bill goes into executive session, I am
going to offer an amendment to flatly prohibit the coinage of silver
dollars for a period of 5 years from the effective date of the act.
The reason is to prevent any recurrence of the recent fiasco on the
silver dollar coinage.
On May 15 there was a release from the White House with a
statement by the President. This contained the following sentence:
Consequently, I have directed the mint to proceed with the making of silver
doUiirs up to the amount authorized by the Coi^ress during the remainder of
the current fiscal year ending June 30.
To many of us it was absolutely incredible, in view of the con-
tinuing com shortage, and the prospective action to revamp the
silver coinage system.
On May 25, 1965, dispatches front wire services informed us the
silver dollar coinage program was off. The first two paragraphs of
the UPI dispatch stated:
The Treasury did an about-face yesterday and announced it wiU not mint
any new silver dollars at this time.
The action with White House approval reverses President Johnson's order of
May 15 for the minting of silver dollars.
I observe in passing that the executive department countermanding
a Presidential order is an unusual procedxu-e.
The next 3 to 5 years will be crucial and critical years in any re-
vamping of our silver coinage system. My amendment woidd make
certain in that critical period there would be no possibility of a
silver dollar coinage fiasco such as we experienced only within the
past month,
I would like to call your attention to a hearing before a subcom-
mittee of the Appropriations Committee on May 24, 1965, where
testimony was developed that trial runs had actually been made on
the minting of the silver dollars authorized by the May 15 Presi-
dential directive. And I quote from page 50 of that hearing:
Mr. CoNTB. Will you, for the record, find out how many triaJ pieces have been
minted?
Miss Adams. Surely.
The information that was requested follows, and I quote:
No silver dollars have been produced for delivery to the cashier as finished coins.
A large number of pieces have been made as trial strikes. But in accordance with
applicable mint regulations, these will be melted.
Digitized byGoOgle
COINAGE ACT OF 1966
I think that answer is rather evasive and unresponsive.
Mr. Chairman, I would like to have for the record before the close
of these hearings the number of silver dollars minted in the trial run.
I note in April 1965, the mint has a record that 339,685,000, 1-eent
pieces were produced. It is inconceivable that they cannot come up
with the number of silver dollars produced in the trial run.
And I also think it is important to know what date was placed on
these silver dollars in the trial runs.
Now, have these trial run silver dollars vet been melted down?
Secretary Fowler. Mr. Widnall, I woula like to make sever^
comments on your statement, and we will supply the information
for the record and give you an answer to your question when that
information is available-— it should be readily available.
(The information referred to follows:)
A large number of silver dollar trial Btrilies were madn ut the Denver Mint.
However, under established security control procedures, these trial strikes are
accounted for on a weight basis, rather than a piece-count basis, and the trial
strikes did not reach the Unal stage of being counted and bagged. All trial pieces
have been melted as required by mint regulations.
From mint control records of the number of troy ounces of materials that were
processed in the pressroom, it is estimated that approximately 316,076 pieces were
processed. The dollar trial strikes were dated 1964.
Secretary Fowlee. I think that without rehashing the entire
situation in detail, since it is behind us, I would onlv want to say that
the committee should be also aware of the fact that in the Appro-
priations Act for the Treasury Department there was allotted $600,000
tor the purpose of making silver dollars and in the report of the Senate
Committee it was very clearly indicated that tlds $600,000 was
earmarked for that particular purpose.
We had deferred the compliance, you might say, with that con-
gressional appropriation — or that expression of congressional will
and intent — -in this particular fiscal year because of the coin shortage
that you referred to, and because of the Treasury's desire to give a
priority use of its facilities for the other necessary subsidiary coins.
However, as the end of the fiscal year approached, we were con-
fronted by the dilemma — and to some degree, as I have indicated
in my testimony, the coin shortage problem had been substantially
reduced— we were confronted by the problem of whether we in effect
ignored the expression of congressiontd will as reflected in the Appro-
priations Act, and allowed the appropriation to lapse, or whether
we should undertake in good faith toward the end of the appropria-
tion year to at least comply in some small degree with that desire.
Now, the decisions that were taken were to begin to comply in good
faith. When the committees that had been concerned with the
silver dollar on the appropriations side in both Houses indicated to
us, through the expressions of leaders of those committees, that they
thought It woidd oe an undesirable course from the standpoint of
coinage to proceed with this production — which happened to be
fullv in accord with our own attitudes — we ^"ery readily complied
with this expression and changed our position.
In the hght of all this, I would welcome an amendment by this
committee fixing very definitely, or deferring very definitely, for a
reasonable period of time any further minting of silver dollars. This
Digitized byGoOgle
26- COINAOB ACT OF 1965
would remove the Treasury from the type of dilemma w© were con-
fronted with before where there were ooviously contending forces in
the Congress, with contending points of view. And we had to look
primarily at the Appropriations Act in question for our guidance.
So, without going to the question as to what is an appropriate
period for the deferment — I have not given consideration to that, I
think perhaps a period of time in which the Joint Commission — ^if it
shoula be the will of Congress to create such a Conmiission — -is being
created and has time to consider the problem would be appropriate
and desirable to put at rest this particular issue. Whether it snould
be 2 years, 3 years, or 5 years is a question which would require some
further thought,
Mr, WiDNALL, Thank you, Mr. Fowler.
Just one short question. During the last war, nickel became in
such tight supply for a period of 2 or 3 years our nickels were made
out of silver. Copper was in such short supply the copper content of
the penny was reduced. The Treasury lent silver to mdustrial users
to make electric bus bars rather than being made out of copper.
Should we run into another such war eraei^ency might we find we are
making our new coins out of materials that would be in extremely
short supply?
Secretary Fowler. I don't think that is likely, although one can
never be positive and dogmatic about predicting or forecasting a
supply- ana-demand situation in times of a war emei^ency.
However, my recollection, based on experience in both mobiliza-
tions, is that the position of the United States from the standpoint
of strategic and cntical stockpiles had not readied the very adequate
position that it is in today, with reference to both copper and nickel.
The very unusual demands that were a conseq^uence of the mobiliza-
tion effort in World War II, before the stockpile program had had a
chance to accumulate the necessiirv supplies, did put tremendous
pressure on those two materials. This was also still somewhat of a
problem, I think, in terms of nickel during the Korean war, because
of the extraordinary demands for nickel for, at that time, the new
type of aircraft.
1 believe today, although the Office of Emergency Planning would
be the more appropriate and authoritative source on this subject,
that given the stockpiles that have been created, given the discoveries
and development of nickel on the North American Continent which
have intervened since the period you refer to, that so far as we can
see, so far as the Department of the Interior and the Battelle Memorial
Institute— those who have studied the problem — can see, the supphea
of copper and nickel are reliable for the long term future to make it a
desirable base for coinage. And I would not anticipate the type of
shortage problems in those two metals in the wars of tlie future which
are obviously going to be of quite a different character than the one
in World War II, particularly the World War II experience.
Mr. WiDNALL. Thank you, Mr. Fowler,
The Chairman. Mr. Moorhead?
Mr, Moorhead. No questions at this time, Mr. Chairman.
The Chairman. Mr. Stephens?
Mr. Stephens. Thank you, Mr. Chairman.
Mr. Secretary, we appreciate the opportunity of having you here
before our committee, especially on the occasion of such an important
Digitized byGoOgle
COraAGE ACT OP 1965 27
item as we know is being proposed by this legislation, a change in our
coin^e.
You have given and other people have given testimony as to the
duration of the transition period — estimatea from 2 to 4 years.
How long do you think it will be before there will be a more or less
general retirement of these coins that have silver in them?
Secretary Fowler. A general retirement?
Mr. Stephens. Yes.
Secretary Fowler. From the coinage?
Mr. Stephens. When predominately the new coins will be in
circulation.
Secretary Fowlbr. We expect them to continue to circulate along
with the new coinage. I think I used the term "indefinitely."
Now, since during the transition period we will arrive at a point at
which we will no longer mint the silver coins — the silver dime, the
silver 25-cent pieces, or the present type of 50-cent pieces — and since
coins, however durable they may be, don't last forever, I should
qualify that term "indefinitely." The life of a given coin is roughly
estimated to be 25 years. So I would think that some time beyond
the next, well, 15 to 20 years, the coins would begin to wear out,
would come back in, and be melted down and added to Treasury
stocks if they existed at that time.
Now, if, of course, there should be, during that period, a develop-
ment of any sizable hoarding, then tiie withdrawal of coins from use
through that particular channel might present a particular situation.
That will, of course, depend somewhat upon another decision — the
withdrawal of the United States from tiie silver market, so to speak,
which we are not suggesting the Congress make at this time, but that
it postpone its decision — until it can have the benefit of the inewa of
this Joint Commission taken in the light of the new emergent situation
which will follow this transition period.
Mr. Stephens. How long did you estimate it will be before you
will stop minting any coins with silver in them? I am talking about
the ones that are being eliminated.
Secretary Fowler. Let's take the dime and the quarter — and we
don't have a precise production schedule at the moment. But I
would roughly estimate that early next year, we would have enough
new quarters to release them and stop making the old ones. Then
some time about the middle of 1966 we would stop making silver
dimes. The time would be when we had built up such an adequate
inventory of the new quarter or dimes that it would be feasible to
b^n to distribute the new coins in the channels of trade. When that
quantity was built up adequately and the distribution begun, we
would stop the production of the old silver coins.
A similar process would follow in sequence with the 50-cent piece,
Mr. Stephens. In your opinion, then, it would be approximately
a year after this is in effect before there will be a possibility of stopping
the coining of coins with silver?
Secretary Fowleb. Yes; roughly. I would say for the 25-cent
piece, which is the one we would hit first, early 1966.
For the dime mid-1966, and the 50-cent piece perhaps the end of
1966.
Mr. Stephens. One other question I would like to ask you.
■dbyGOOgIC
2S comAOE ACT OF iges
It has been proposed, I think, in the Senate that an amendment be
made to this bul to make it a crime for bank officials or bank employees
to blackmarket new coins to coin dealers. Would you think we ought
to add such an amendment to this?
Secretary Fowleh. Well, I don't have a view on that proposal,
currently. I frankly think that as far as the new coin is concerned,
this is not going to be a problem. They are going to be produced in
such quantity, and we would expect at the time of distribution there
would be such a mass distribution, that there would be very little
incentive or occasion for a bank official to take advantage of his
particular position in that regard. So I really don't believe this is
going to be a serious problem, given the program that is outlined here.
If wo had a different program, in which there would be a high
premium for a subetantial period of time on the possession of one of
the new coins, I think we might have to take a more serious view of it.
Mr. Stephens. Thank you. I believe my time has expired, Mr.
Secretary.
The Chairman. Mrs. Dwyer?
Mrs. Dwyer. Thank you, Mr. Chairman.
Mr. Secretary, on p^e V of the very excellent Treasury staff
study, among the important criteria thought to be mandatory in
association with this proposed change in coinage is, and I quote — ■
With this I most assuredly agree.
But without complete understanding, there could be misunder-
standing and family noarding during the transition to the new coins.
Yet in the face of these obvious reahties for public understanding, the
President's statement and Treasury study were made pubhc on the
day of the Gemini space shot. On last night's network TV programs,
the coinage announcement was of secondary interest, and the reasons
for the change were hardly mentioned. The same occurred in most
of this morning's newspapers.
Why, Mr. Secretary, then, did you delay your announcement to
coincide with the Gemini space shot? Was tms just a coincidence?
Secretary Fowleh. This was a coincidence. When we learned
of the conflict in schedule, we felt that in the interests of time we
should move ahead anyway. The chairman stated that he would
provide this hearing today so that the Congress could move ahead
quickly on this legislation. Therefore, we decided against post-
ponement even though, as you quite properly indicated, we knew
we would have to take, very definitely, second bilhng in terms of the
news today.
However, I do believe that this matter affects every individual
American so closely and intimately that we will not be lacking in the
weeks ahead for pubhc writing and description and comment and
displays regarding it. I think uiat the problem of pubhc information
is a very real one. We have been quite conscious of it and have had
the TVeasury staff study, which you referred to, made available so
that everyone could have the facts and the observations and the
criteria in detail.
Our public affairs office is going to do its dead level best to make
available to all interested parties all the information that we have on
the various aspects of the problem.
Digitized byGoOgle
COINAGE ACT OF 196 S 29
This launching of spacecraft is getting to be such a regular thing in
American life, it is pretty hard to avoid a conflict with it in any given
week,
Mrs, DwYBH. But it was announced 10 days or a week e^o when it
was going to be. It just seems to me the timing of this report was very
unfortunate. Because I anticipate a flood of letters inquiring about
a change of the coinage. It seems to me if it had proper publicity,
people would understand without writing the hundreds of letters I
am sm-e we are going to get about it.
Secretary Fowler. Well, I have no further observations to make
on it. I would hope that the matter would be adequately covered as
a result of these hearings and the other hearings. It is very, very
difficult to time all that you do with reference to ail other things that
are happening. A revolution may break out, or some other difficulty.
We are qmte content to have second billing to any g^ven day for
this particular problem.
Mrs. DwYER. Thank you.
The Chairman. Mr. Weltner?
Mr. Weltner. Mr. Chairman — ^Mr. Secretary, I, for one, would
like to commend you for proceeding to discharge the responsibilities
of your office as those responsibilities might require, rather tlian as
the prospective newspaper headlines might indicate. I think it is
fine that we have a high ranking official who is proceeding on that
basis, rather than on the publicity value of whatever proposals might
be made.
I wonder why— if these coins are to circulate side by side — why we
need a transition period at all? Why is it not appropriate to start
turning these things out?
Secretary Fowler. I think that too much can be read into our
use of the term "transition period." We mean it to describe that
fieriod of time in which the tooling-up process, the acquisition of
acilities, the acquisition of the adequate quantities of the new mate-
rials for the new coins, the building up of an adequate inventory for
initial distribution in series, so to speak — that is what we have in
mind when we say "transition period."
If your question goes to the proposition as to the timing of the
release of the new com, whether that can be done more or less off the
Eroduction line rather than building up a very sizable inventory, it
as been our judgment that tlie building up of a sizable inventory
and the release in more or less mass proportions would avoid any
initial problems of hoarding or the kind of problem that Congressman
Stephens referred to-— some discrimination in the distribution— and
that handling it in the way in which I have indicated would take the
edge of noTWty off very quickly and bring the situation back to a
more or less normal attitude as far as the new coins are concerned.
Mr. Weltner. One other item that interests tne
Secretary Fowler. I might say, also, that we learned a lesson in
the handling of the Kennedy half dollar. It went out in smaller
quantities and did give rise to hoarding. Perhaps there would have
been the same degree of personal acquisition of the coin for memento
or family use. But we do feel that in the light of that experience,
when a new coin comes out, that if it can be distributed initially in
mass quantities, this is the preferable course.
Mr. Weltner. There is one other request I would like to make,
and that is to be furnished a table showing the intrinsic value of the
Digitized byGoOgle
30 COIXAQB ACT OF 1965
metals in the existing silver coinage, as compared to the metal in the
proposed new coinage.
Secretary Fowler. Such a table wiU be readily available.
Mr. Wbltnbr. Thank you, Mr. Chainnan.
(The information referred to follows ;)
Jntrifuic value of pretent and proposed eotTU
(Per piece]
»•
'Sff'
tO.OM
' Includes sllv«r and copper.
> Includes copper and nickel.
The Chairman, Mr. Hanna?
Mr. Hanna. Thank you, Mr, Chairman.
There are four points I would like to make. The first one has to do
with the balance-of-paym'ents problem. As I looked at your chart,
it occurred to me that with 550 milli on troy ounces being used in the
United States this year, with the production being somewhere be-
tween 36 and 37 million troy ounces, that we were buying — assuming
we had run out of our supply here in the United States, and we were
buying this, we would be buying foreign silver to make up the differ-
ence between what we produce and what we use, which would appear
to me to be somewhere between $650 to $700 million worth of suver
we would have had to be bujdng on the foreign market. And I ask
you : Is there not a future balance-of-payments problem if we continue
to use silver in these large quantities?
Secretary Fowler. Without following the arithmetic, the total
consumption figure you mentioned, 650 milhon, was the total es-
timated consumption for the free world. The total estimated con-
sumption in the United States for 1964 was substantially less than
that. Our industrial consumption in 1964 was 123 million ounces
and coinage use, 203. So our total use in the United States was 326
mUlion ounces for that year. However, that is somewhat a matter
of detail.
Your point that our use of silver does entail a substantial importation
from abroad is a very real one, but in that 326, just again to quantify
it, a large portion of that use in the United States in 1964 was from
our own stocks and, thereby, diminished any potential drain.
Mr. Hanna. I understand. May I go to point 2?
Secretary Fowler. We imported in the United States in 1964, just
to quantify this, about 52 million ounces, which is a substantial
amount.
Mr. Hanna. You might put in the record what you think you might
import for next year.
(The information requested follows:)
U.S. imports of silver, excludinff relatively amall amounts of coin, averajfed
juat under 60 million ounces annually in the 5-year period 1960-64. During the
first quarter of this year, the Bureau of the Census reports im^rts of 11.2 million
ounces, possibly somewhat reduced in amount by a dock strike which ended in
mid-February. Any estimate of the volume of diver imports for the full year
Digitized byGoOgle
COmAQE ACT OF I96i 31
1965 is neeeBurily tentative mid veiy approximate. However, a reasonable
e^ectation might be for imports eomewl^re in the neighborhood of 55 to 6P
million ounces.
Mr. Hanna. Another thing for the record, on point 2. I am in-
interested ID the seignior^e position. Would you kindly put down for
the committee what your present position is on seigniorage on the
nickel, dime, quarter, and half, and what that position will be when
yoij change to the new metals?
Secretary Fowlbr. We will supply that for the record, sir,
(The inmrmation referred to followB:)
Seigniorage, eaiimates current coins and neiB alloy eoitta
ISelgnlnage equals dlSecenos between bcs value of coins and the coat o[ metal In tbe coIhe]
ssa
Hon rates
attl.OOOtece
"if
Minions 01
pleoea
PresenI coins MO sUver 100 copper:
11,000.00
93E.2T
102.0
1,020.0
B.6
mo
M.73
ItoenU:
1,000.00
»36.2r
o&o
M.TS
«) cents:
i,ooaoa
MS.37
m.tr-
0.3
102.0
M.7S
1,»10-
1.000.00
-••■«£:.
l,02Q.ff
00.0
MI.BB
3S cents:
1.000.00
~'^™iue_
■■ffl!!
90.0
M7.6S
M.S
ill.*
78.7
1,000.00
Ptesent minor otrins (no Chang*) :
'"5rjr?^';.Z^
M.7
BtUtOatt^ ,. -— -
B4T.M
1-cent bronie;
1,000.00
829,80
21.4
BZ.1
en.ao
IS Mint, June 7, IBU.
Digitized byGoOgle
82 COINAGE ACT OP 1965
Mr. Hanna. On point 3, I should like to point out that I have a
very strong feeling about the half dollar. First of all, I think that all
of us who look objectively at it might agree it was the b^gest mistake
'we ever made to make the Kenneify haU dollars, in terms of our silver
shortage. I also think the half dollar is a psychological point at which
people stop looking so heavihr at utility of coin and start thinking
about the depoaitive value, of^it being a matter of themselves saving
the value of the coin. So I don't think we should emphasize the hau
dollar. That is my own personal belief. We think we ought to
put out more dimes, mckels, and quarters, and go easy on the half
dollar. I don't know whether you agree with that.
Secretary Fowlek. We do agree with you on that. And I think
we have in mind the other fact which is related; that, as a practical
matter, you can be more flexible in your production run on the half
dollar because, if we run into any problem as a utility matter, two
quarters will serve equallv well. And we agree with you that the
emphasis in this program has to be on the dime and quarter.
Mr. Hanna. As tiie last point- — we know what the acceptability is
for the coins made with the 400-fine silver. You apparently beheve
that the pubHc will accept the cupronickel coins.
My question is: Has the Treasury or the Mint imdertaken any
studies or any trial programs to see what the acceptability would be?
Secretary Fowler. No, we have not taken any polls or surveys or
studies in depth of the personal reactions of the public because we
would have given rise, I think, to a lot of conjecture.
Mr. Hanna. Do you think that the pubhc will accept these new
coins?
Secretary Fowler. I certainly do.
Mr. Hanna. On what do you base tliat belief?
Secretary Fowler. Well, in addition to reactions of all of us
around — maybe I am not a very good yardstick for this, but they
seem to be very acceptable, and nandle well, and their appearance is
attractive — I am incbned to agree with the chairman. It is what the
coin will buy; as long as a quarter will buy me a quarter's worth of
goods, I am not concerned, at least I reahze there are a number of
other people who have entirely different tastes. But the predominant
element of acceptability here seemed to us to be as a function of use
rather than in terms of appearance.
Mr. Hanna. Thank you.
Secretary Fowlek. And those that are of course concerned about
the appearance of the coin, we think that the new coins will be reason-
ably attractive and acceptable, and we think that the silver 50-cent
fiiece will be, continue to oe, a prestige coin which will appeal to those
or which coinage has that particular ring.
Mr. Hanna. Thank you, sir.
The Chairman. I would like to clarify two points for the record.
No. 1 — aU coins, all paper money, are all of equal value as legal
tender. You can pay a million dollar debt with copper cents if you
want to. That has not always been true. You can pav any debt
with 5-cent pieces or 25-cent pieces, and it makes no aifference. It
ifi all acceptable legal tender.
With respect to 50-cent pieces, isn't it true that vending machines
generally don't use 50-cent pieces?
Secretary Fowlee. Up to now that is the case, although I think
there are some isolated uses.
Digitized byGoOgle
<X>INAO£ ACT or 1965 OS-
The Chaihman. The only place I know of is Las V^as, for instance,
in the gambling devices.
Secretary Fowler, There are also isolated uses in coin-operated
drycleaning eetablishments and change makers.
The Chaihhan. Mr. Brock?
Mr. Brock. Mr. Secretary, we appreciate your being here today.
I am somewhat concerned over the point of the 50-cent piece con-
taining some degree of silver. You say that we need a prestige coin.
I would point out that I think we have a prestige coin in the silver
dollar, which you are not affecting, is that not true?
Secretary Fowler. That is right. They are not very much
around these days, however.
Mr. Bhock. Isn't it true there are not very many around because
it is a prestige coin and it does have silver content?
Secretary FowLEK. I think it is mainly because th^ haven't been
produced and distributed sufficiently in mass supply.
Mr. Brock. But we have some evidence of hoarding of silver dollars,
because the silver content in the silver dollar is currently worth a
dollar. If the price goes up any more, it will be worth melting them
down.
Secretary Fowler. Correct,
Mr. Brock. Now, you point out that we are going to maintun
the 50-cent piece as our prestige coin. Are you not encouraging the
hoarding of this particular item, even though the silver content is
reversed down to 40 percent? — by referring to it as a prestige coin,
you do give people a psychological incentive to stash them away.
Secretary Fowler. I say if they want to stash away anything,
that is what it tends to rivet on. You are quite right in that. How-
ever, I am not sufficiently conversant with the mental attitudes of
hoaniers. I frankly don't understand a lot of it, and why they do it.
And I believe that thb program here, in many ways, b designed to
discoiu-age and to flatten out whatever these tendencies are to hoard
coins for the sake of realizing on them in a melted-down form.
Now, as to the collection of coins for family purposes, for gifts for
children, for those people that are collectors and many, many other
things, I think this is a rather neutral program in that regard. I
think it doesn't affect it one way or another, except we are taking
measures in the transition period by dating, and devices of that sort,
to minimize any withdrawal from the existing coinage supplies, to
minimize any drain, I might say, during this transition period.
Mr. Brock. I am quite honestly concerned. I thmk we are a
couple of years late in aoing what we are doing. But I think there is a
possibility that by naming it a prestige coin, just that one fact, is
asking for trouble.
Let me talk about the general situation with regard to silver. Are
you currently selling silver outside of the area of redemption of silver
certificates?
Secretary Fowler. No.
Mr. Brock. You have approximately a billion ounces of silver; is
that correct?
Secretary Fowler, That is correct,
Mr. Brock. That would be about enough, then, to cover the
outstanding silver certificates we have? That is fairly close, isn't it?
Secretary Fowler. We can more than cover it.
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34 COINAGE ACT OF 1966
I think our mai^in, our additional ma]^;iD OT«r and above, would
be about 275 million ounces.
Mr. Brock. You are, are you not, in cooperation with the Federal
Reserve S^tem, pulling out silver certificates from circulation as
possible, without redeemmg them — replacing them by Federal Reserve
notes?
Secretary Fowlee. That is correct.
Mr, Bhocs. Why, Mr. Secretary, in the hght of the enormous
increase in demand, not only for industrial but for defense purposes
in the use of silver, why do we not provide for a strategic silver reserve
in this bill, then, or propose new legislation to amend
Secretary Fowler. My understanding is that that legislation or
that type of proposal is being considered separately as a result of the
work and at the behest of the Office of Emei^ency Planning, I
think the two proposals are running concurrently, or will run conciir-
rentlv, in the Congress. But we would have had some jurisdictional
problems.
Mr. Brock, I hope they do, because I think it is important tiat
we coDsid^ this.
Secretary Fowler. I think there was an annoimcement yesterday
from the Office of Emergency Planning on this matter, indicating that
they have a target of approximately 165 million ounces of silver that
they thought would be necessary and desirable for the stockpile.
Mr. Brock. The thing that has concerned me is that if people
began to realize just how critical this situation was, and if they oe^an
to noard silver certificates, then you would have a situation in which
you had very littie latitude, very little leeway, for the stockpile.
Secretary Fowler. We would have substantially enough more to
take care of this problem.
Mr, Brock. For the current year. But the fact is that our con-
sumption is considerably in excess of world production — and this
surplus isn't going to last for long.
Secretary Fowler. I was speaking in terms of redeeming silver
certificates. We still would have enough.
Mr. Brock. It is true you would have $200-plu3 milBon worth of
Secretary Fowlbb, Ounces of silver,
Mr. Brock. Which is in excess of the request for the defense stock-
pile.
But the point is that we are using — I have foi^ttrai whether it is
100 or 200 milhon ounces, in excess of world production today; are
we not?
Secretary Fowler. I can't follow your figures. But we are usiug
substantial amounts in excess of production.
Mr. Brock. We are consuming substantially more than we are
producing.
Secretary Fowler. There is no question about that.
Mr. Brock. And we still will be consuming more than we produce
even if we stop all silver coinage.
Secretary Fowler. No question about that,
Mr, Brock, So silver is a critical material.
Secretary Fowler, No question about that. It is a critical mate-
rial from an industrial standpoint, and I think that even given a
solution in the treatment of tne coinage problem — whatever you do
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COmAGB ACT OP lft«5 35
about coinage and whether or not you stop the use of silver completeljy
in coin^e— it will still be a critical problem. The solution of it is
not at the moment within the reach of our handling of the coinage
situation.
The question that is before the committee in r^ard to the continued
use of silver, I think, is a very limited one. It is whether or not,
after the transition to the new coinage, it is worth 15 million ounces
a year, which ia roughly 5 percent of the current use of silver for
comage, to maintain a link with silver in the form of this reduced 40-
percent silver 50-cent piece. That ia a very real issue. I think it is
one that I hope you will resolve in this legislation, along the lines that
the President has recommended, by providing for this type of coin.
It may be that years from now— 4, 5, 7 years from now— this will be a
burning issue before the proposed Joint Commission.
Mr. Brocs. Well, I consider that to be one of the things we should
consider. But I think our responsibility is considerably broader than
that. If it were me, I would like to see the Treasury consider, as
these new coins come out in full production, actually pulling silver
coins off of the market as they are doing with silver certificates,
because I think there is quite a distinct possibility that we will be
in a critical need situation in the coming 4 to 5 years.
Secretary Fowler. Well, on the question of the rate of withdrawal,
what we qo now is to take a coin back when it is worn out. We
retire it when it comes in; we put the silver in stock.
Now, the question you raise is whether we continue that process or
whether we should accelerate the withdrawal after your new coinage
is in use in adequate supply. This is a question which I think is
quite appropriate to ask. It is one of the things that was behind the
proposal for this Joint Commission on Coinage. I think if there is
any difference between us it is a question of the timing of that decision.
We felt that the timing of the decision on the rate or method of
withdrawal of the existing coinage is one that could be better taken
after the new system was m operation, and any possibility of a coinage
crisis, you might say, had been averted. Meanwhile, we need alver
coins for circulation.
Mr. Bhock. I hope we don't delay so long that we face a serious
crisis in defense needs ia the silver that we have.
Thank you.
The Chairman. Thank you, Mr. Brock,
Mr, White?
Mr. White. Thank you, Mr. Chairman.
Mr. Secretary, it is very good to have you here.
I think that we should, put in proper focus the transition pericd,
I believe you would be incorrect if you would leave the idea that we
are talking about a 15-year period.
It is my understanding — and I assume there is some f^eement in
your office — that the transition period is the length of time that we
can defend the price of silver at $1.29, which is necessary during any
transition from one coinage to another, no matter wnat the new
coinage would be. We must protect the existing coinage — $1,38 per
ounce is the value of the silver contained in the dime, quarter, and
one-half dollar piece.
Now, isn't the transition period really predicted on the length of
time that you can defend the price at $1.29?
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36 COINAGE ACT OF 1965
Secretary Fowler. I think everyone can have his own "transition
period," so to speak. But the one I have in mind, when I use the
term, is the period of time it takes to produce and distribute and to
have an adequate supply of the new coins in use, so that trade and
commerce that is related to and dependent upon coinage is not sub-
jected to the threat of anv shortage.
Mr. White. Let me ask you this question then;
If we did not have our stock of silver, which we started out with
in 1963, do you believe that the price of silver due to the shortage
that you talked about here, and the lack of supply, would be at the
$1.29 price today, or is not the $1.29 price a direct result of the re-
demption of silver certificates at that price?
Secretary Fowlbh. I think so.
Mr. White. Well, therefore, to continue to defend that price, we
have to take a look at .how long the existing stocks of silver will last;
is that correct?
Secretary Fowler. That is certainly true,
Mr. White. How long do you believe the existing stocks of silver
will last at the present rate of redemption?
Secretary Fowler. I would not like to make an estimate on that.
I think it will be a sufficient period of time to affect in an orderly
and nondisruptive way the program that we are presenting to the
Congress here.
Mr. White. What was your rate of redemption last year, Mr.
Secretary.
Secretary Fowleh. 141 million ounces.
Mr, White. How much silver was freed during this same period?
Secretary Fowler. About twice that.
Mr. White. It is my impression it is near 300 million ounces.
And that means with a billion ounces, you have 3 years' supply.
Therefore, the transition of one coinage to another definitely must
take place within the 3-year period.
Secretary Fowler. That is correct.
Mr. White. And, therefore, you can further say that the 7-cent
nickel made during World War II, when we substituted silver for
nickel, is presently being melted down. I have a block of the silvOT
in my desk refined from silver nickels. So, therefore, we have to
face the possibility of our subsidiary coinage being melted down it
the price of silver would exceed $1,385; is that correct?
Secretary Fowler. We include a provision in the law that we rec-
ommend for the creation of standby control over the melting and
export of coins,
Mr. White. Well you didn't necessarily make a provision in this
law. You indicated a possibility of such a provision. You did not
make a definite recommendation.
Secretary Fowler. We put it on a standby basis, a^inst the pos-
sibility or the probability that we don't really foresee. But we
would have recourse to it if necessary.
Now, I think there is set forth clearly in the President's messM;e
the rationale of what we are trying to do. We think that our stocks
are adequate to protect the silver coinage during the period in which
the new coinage comes into effective use. We do not wish just to look
to one side blindly and ignore the possibility that our judgment mi^ht
be wrong. We feel that an additional protection - for the existing
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COINAGE ACT OF 1965 37
coin^ie should be requested and it is requested. It takes tlie form of
this standby authority to institute controls over the meltmg, treating,
or export of U.S. coins — something that today would be legal could
become illegal, could become a crime if it becomes necessary.
Mr. White. It would take some act of Congress, however, to do it.
Secretary Fowler. That is what I am saying — with the aetion
reconunended here. We hope it won't become necessary to issue such
regidations. We don't think it will. But the tool in the closet would
be a useful and desirable piece of legislation.
Mr. White. Wby didn't you also suggest in your legislation the
possibility of end-use certificates to see that this silver that is purchased
or redeemed from the Treasury went into the channels of industry?
It would seem to me a logical use of such a procedure to provide that
the industry was supplied with silver.
Secretary Fowler. Well, I think you will find in the studies a good
deal of commentary on the pros and cons of this particular question
ot end-use certificates. We simply made a judgment that at this
particular time, as we see it, this would be a counterproductive and
unnecessary nuisance for trade and commerce.
Mr, White. Why suggest it for the coinage, then?
Secretary Fowler. Well, coins are one thmg, and silver is another.
Mr. White. I don't really see the difference today when we are
talking about the redemption of silver certificates.
Secretary Fowler. We think there will be quite a difference in the
period ahead.
Mr. White. The buUion that you hold at West Point? There is
a great difference?
Secretary Fowler. A great difference between what?
Mr. White, Between the coinage and the silver you hold at West
Point-^is there a difference?
Secretary Fowler. Well, for one purpose there is no difference.
For other purpose there are. The question of placing, in this par-
ticular situation, a complete governmental control over the industrial
and artistic use of silver down to the various job shops is a different
question, I suggest, from the one — related, but quite different and
much more senous — than providing standby authority we have asked
the Congress to enact wnich would prohibit the melting of U.S.
coinage. End-use controls involve a much sharper and more rigid
deCTee of control with lots of additional consequences.
The licensing of silver, would, we beheve, tend to result in a two
price system, here and abroad. You would have the legitimate
mdustnal, professional, artistic uses, at the $1.29 figure; you would
eventually have perhaps a higher black market price paid by specu-
lators and hoarders. And if this price in the second market, so to
speak, went substantially beyond $1.38, it would tend to make our
existing coins disappear, either into hoards or through melting.
So there would be a grave risk, I think, attendant upon the institu-
tion of end use controls of the sort you seem to suggest.
Mr. White. Well, Mr, Secretary, isn't the whole transition period-
speaking of transition again — predicated on the cocirculatioii of the
two coins side by side, and also the continued defense of the price of
silver at $1.29?
Secretary Fowler. That is correct.
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38 COINAGE ACT Or 1965
Mr. White. And if your assumption is correct, we will end up with
a change in our coinage.
I would like to ask you one further thing. I have a list of questions
I would like to submit to you for answers for inclusion in the record.
Secretary Fowler, I would be dehghted to hare those questions.
We will work on them over the weekend and try to get the answers
to you just as soon as possible.
Mr. White. Thank you.
(The following questions and answers were submitted for the
record.)
Anbwbbs to Queshons Submitted by Mr. White to Secretart Fowleb
Question 1. Ib the aolution offered as temporary relief only? If so, why not
seek a long-range solution now?
Answer. Our proposal is not offered as a temporary solution. As the President
said in his June 3 message: "This legislation * * ' will insure a stable and digni-
fied coinage, fully adequat« in quantity and in its specially designed technical
eharaeteriatics to the needs of our 26th-oentury life. It can be maintained
Indefinitely, however much the demand for coin may grow."
However, certain issues such as the timing and circumstances under which the
Government should continue to maintain the price of silver indefinitely, and the
future of the silver dollar, are better decided in the future on the basis of experi-
ence. For this reason, and because it is possible that unforeseen problems might
arise, or technological developments affecting our coinage, might occur, we have
proposed the establishment of a Joint Commission on the Coinage to study and
report on developments.
With respect to the basic program we have recommended, however, we have
every reason to expect, as the President said in his message, that "the recom-
mendations being made for a new coinage are sound and durable."
Question 2. Why is the silver content of the dollar to remain the same? If
sal^ of silver at any price are authorized, as contained in section 6 of the bill,
what is the need for keeping the monetary value of the dollar the same?
Answer. The discretion in the bill with respect to sales of silver is to permit
operations within a narrow range of the $1.29 plus per ounce price, representing
Wie monetary value. To help in maintaining the present market price for silver,
and prevent speculative hoarding of the existing silver coinage, we think it is
important psychologically not to make any change in the monetary value of
silver which coincides with the SI. 29 plus price. Since 1792, the monetary value
■o( silver has been set by the silver content of the silver dollar. Thus even tbou^
we would continue to redeem silver certificates at $1.29 a troy ounce, a change
in the content of the silver dollar could not help but put an upward pressure on
the price of silver.
Question 3. In section V of the Treasury staff study, two condltiona for a
transition to a reduced silver content coin are set foith, namely:
(a) There be no coin shortage at the time.
(6) The existing coin should be recoverable.
Why are these conditions unique to a change to a reduced silver content coin?
Do they not equally apply to a change to any other metal?
Answer. A reduced silver content of coins, in this instance, refers to reducing
the silver content of all subsidiary coins, rather than only one, as recommended
by the President. The conditions referred to here are crucifd for a change to
a system of reduced content of all silver subisidiaiy coinage because to nave
enough silver to carry out such a program would require the recovery of the
silver in most of the existing hi^-content silver comage. In turn, the existence
of a coin shortage makes any substantial scale of recovery of the existing coinage
virtually impossible.
The conditions do not apply with similar force to the transition to a system
In which nonsilver alloys are used in the 10- and 25-cent pieces. Subsidiary coin
shortages are unwelcome in any case. But, there is an important difference in
that with silver removed from the 10- and 25-cent pieces. In this case the problem
of overcoming existing subsidiary coin shortages becomes one of production and
distribution, uncomplicated by the rapid depletion of the new coinage material
itself. The Mint has given a graphic example in the case of pennies and nickels
of the way in which severe shortages can be quickly overcome by a massive
production effort.
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COINAGE ACT OF 1966 39
The further Etnd very eignificant difFerence with uonsilver alloja is that the
existing silver cranage does not have to be recovered bo thiit two coins can be
made from one. Instead, the existing coinf^e is left in circulation, side-by'Side
with the new coins. If it should develop that any substantial portion of the
existing coinage were being withdrawn from active circulation by the public —
and no such development is anticipated — higher levels of production of the new
coins should be able quickly to offset any conceivable scale of withdrawals.
There would, in fact, seem to be more reason to expect sizable public with-
drawals of the existing silver coinage if the Government were withdrawing
high-content silver coins in order to replace them with low-content silver coins.
Such withdrawals would add to any developing coin shortage. Under the
proposed legislation the public will be able to retain and use the existing high-
content silver coinage.
Question 4. Do you have any estimates of how much silver coin and bullion fs
held for speculative purposes? Why are your figures for silver consumption not
broken down along these lines? Would you supply the committee with such
figures?
Answer. The Treasury has not prepared any estimates of silver coin and bullion
which is held (or speculative purposes. Although there are some indications
that silver bullion is being held for speculative purposes (last year redemptions
of silver certificates for silver was greater than total U.S. use of silver for industry
and the arts), precise information on this subject is very limited. We do have
names of individuals and companies who have redeemed certificates, but it would
be difficult to determine positively that such redemption transactions were for
speculative purposes. It is also difficult to estimate very precisely the degree
of coin hoarding. In view of the above, the estimates for silver consumption
are not broken down along these tines.
Question 5. How do you explain an average consumption of silver tor coins of
40 million ounces from 1949 to 1960, and the doubled, tripled, quadrupled and
more in later years?
Answer. It would be difficult to explain adequately the reasons (or the recent
substantial increase in the use of silver for coinage, but a number of items can
be cited as contributing factors. Some years ago, the number of coin collectors
or numismatists was quite limited, and most numismatists were content to collect
one or two coins of each denomination. In recent years, with increased prosperity
prevailing throughout the country, the coin collector ranlts have increased sub-
stantially and l£eir number is now estimated at approximately 10 million or
more. Collecting habits have changed, and instead of saving one or two coins,
many persons, especially those who speculate in coins, have adopted the habit
of saving rolls and bags of new coins, the latter referred to as "min^sealed bags"
and putting these coins away in hopes of a substantial appreciation in numismatic
value, several years in the future.
Coin dealers have become very active in this field, and have encouraged the
activities of new collectors by numerous advertisements with captions such as
"How To Retire m 10 Years With an Income of $10,000 Per Year" and by various
other schemes for selling coins at premium prices. In addition to collectors and
dealers, speculators have also entered the market and have withheld large quanti-
ties of coin, both new and used, from the market for sale at premium prices.
There are many factors, in addition to those cited above, which require addi-
tional quantities of coins. These include the recent very substantial growth in
the coin vending and servicing machine industry; the expanding population;
coins needed for children's school lunches; and increasing requirements for high-
way toll booths, parking meters, automatic laundries, and many related business
activities.
Question 6. On page 15 of the study, it said that in a change to a reduced silver
content coin, "It is not self-evident tliat Treasury stocks would last."
(a) Should you not also count on silver from returned coins, industrial recovery,
and dehoarding?
(6) Why must it be self-evident?
Answer, (a) A full examination of the feasibility of reduced content silver
coinage might well include some consideration of the silver that woiild Iseccone
available to the Treasury in the form of retuired coin. An effort was made to
allow for the effect of such recoveries in secticn V of the Treasury studv.
{&) It was mentioned at page 16 that the adequacy of Treasury sil\'er for a
transition to reduced content was not "self-evident." At the end of the para-
graph in question it is stated: "The problem of the transition to silver coinage of
reduced content is examined more fully in section V of this study,''
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40 COINAGE ACT OF lOaS
There is no reason why the probable lack of success of such a transition would
have to be self-evident. However, a transition to reduced content silver coinage
oertainly could not be recommended unless study of the problem indicated that
there was every indication that the transition could be negotiated successfully.
The TreaBury study concluded that this wafl not the case on any reasonable set of
aaaumptions under present circumstances.
Question 7. Referring to page 16 of the study, why would speculation in silver
be more accelerated by a chauge in monetary value than by knowledge that the
Treasury silver is being depleted by the indiscriminate sales authorized in the bill?
Answer. Comparison of the two situations on the basis suggested by the ques-
tion is difficult since no indiscriminate soles of silver are contemplated. If the
e'Oposed legislation is enacted, the redemption of sUver certificates required by
w will be continuing against the background of sharply reduced silver require-
ments for coinage, and the prospect of any early and destabilizing increase in the
market price of silver will become remote. However, provision for sales of silver
not required as backing for silver certificates simply offers additional assurance
that the market price of eOver will not rise above the existing monetary value.
Sales would not be authorized at any price less than the monetary value of silver.
By providing assured access to Treasury silver stocks, the net result of the pro-
[losed legislation should be a pronounced dampening, not on acceleration of specu-
ation in silver.
On the other hand, the reference at page 18 of the study was to the effect of an
increase in the monetary value of silver while a transition was being made to base
alloy subsidtary coinage. Such an increase in the ceiling to which silver prices
might rise could very well have the effect of encouraging some speculation in
sUver, even though coinage use of silver was being cut back. If the monetary
value were raised while silver was being continued in the coinage, very heavy speo-
ulaUon in silver would surely result. Any change in the monetary value of silver
during the transition to a new coinage system would be ill advised.
Question 8. Why does the study base its figures and conclusion for rejecting a
reduced silver ctmtent coin on a 500 fine silver coin, when in fact a 400 fine coin is
perfectly acceptable and recommended?
Answer, Section V of the study considers the transition to reduced content
coinage for the cases of subsidiary coinage of both 400 and 500 fineness. Several
special assumptions and cautions noted there may bear repeating here.
(1) It was assumed that the crash coinage program would have removed all
shortages of subsidiary silver coinage by the endof fiscal 1966, after which coinage
requirements would fall to less than oi^e-half of current levels.
(2) Very optimistic estimates were made of the amount of the existing coinage
that might be recovered. It was pointed out (p. 64) that the estimated scale of
recovery was selected not because it was inherently plausible, but simply to work
out the implications of attempting a transition to reduced content silver coinage
under favorable circumstances.
(3) It was emphasized at page 64 and elsewhere (for example, pp. 66, 69, and
73) that under present circumstances, with shortages of silver subsidiary coins still
persisting, there wasno realistic possibility of recovering anything like the amounts
of old silver coin that would be required for a successful transition.
Section V concluded that under existing circumstances the risks would be intol'
erably great in the case of a transition to either 400 or 500 fineness subsidiary
coinage, although the situation with 400 fineness was not quite so hopeless BH
with 500 fineness. It is not correct to state that the study "bases ite figures and
conclusion on a 500 fine silver coin."
The study did suggest in an appendix to section V tliat a clad silver 60-cent
piece of 400 fineness could be continued in our coinage system for a good number
of years, perhaps indefinitely. However, the estimated 15 million ounces annual
use of silver that might eventually be devoted to this purpose would be a fraction
of the requirements if an attempt were made to retain silver throughout the
subsidiary coinage.
Question 9. Referring to conclusions on pages 30 to 36 that it is merely a matter
of conjecture how the price of silver must go to put supply and demand into
aJinement. Was any attempt made to reach scientific conclusions about this?
If none were reached, why does the study so emphatically state that there isn't
enough silver for reduced-content coins?
Answer. It is true that the discussion in the study at pages 30 to 36 did not
arrive at a precise, single-valued forecast of the price level at which silver markets
might eventually be equilibrated. However, that discussion did establish a
Strong presumption that silver prices would rise about $2 per ounce by 1980 or
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COINAGE ACT OF 1965 41
1985 if subject only to the forces of private supply and demand. This conclusion
found some indirect eupport in tlie detaUed trend projections made by Battellc in
tlie course of their parallel investigation, and in a recently released study of the
Department of the Interior (Information Circular 8257). Significantly enough,
the latter investigation detennined (pp. 17-18) that even with a rise in silver
price to $2 to S3 an ounce, the early effect upon output would not be great.
Every attempt was made to examine the silver supply situation objectively and
thoroughly. It is not believed that any imporiiant published sources of informa-
tion were left uninvestigated. It is true, of course, that "scientific conclusions"
are difficult to draw in this area and some residual areas of uncertainty inevitably
remain. For this very reason, 500 fineness silver coinage was not ruled out as a
result of the discussion at pages 3D to 36 and its consideration of the level that
silver prices might reach. The study's conclusion that there is not enough silver
for reduced content subsidiary coinage was reached only after careful investigation
of the difiicultiea of achieving a successful transition (see. V).
Question 10. On table 2-A of page 70 in the Treasury stafF study, the indication
is that the transition to a 40 percent silver content for all coins could be made
with a surplus of 262.3 million ounces in Treasury silver renaaining in 1972. Surely,
there is no question but that 40 percent silver halves, or even quarteo^ could be
made; is there?
Answer. The same special assumptions and cautions noted in the answer to
question 8 above are applicable in interpreting table 2-A. It is doubtful whether
that table, itself, adds much to the case for a single coin. However, there is every
reason to believe, as the question suggests, that some 40 percent silver half dollars
can he produced. As noted in the appendix to section V, an eventual annual
coinage of 100 million of these would use about 15 miUion ounces of silver.
Whether or not even such a limited scale of coinage could be continued indefinitely
is not certain. However, if it could not, the shift to another alloy in the hau
dollar would probably not present serious difficulties. The retention of any
silver in the dime or the quarter is not a practical possibility.
Question 11. Since the assumption is that the cupronickel coins will circulate
side by side with the present coins, would there not be over 1 billion ounces (^
silver returned to Treasury from recovered coin? What do you think the Treasury
should do with this silver?
Answer. It is contemplated that the new coins will circulate side by side with
the present coins indefinitely. Over time there may well be gradual recoveries
of the existing coinage in the ordinary way as it becomes worn and is returned to
the mint. This silver might then l>e added to Treasury stocks if such existed at
that future time. Aside from minting the new half dollar, the question as to what
would be the most appropriate use for this silver is a difficult one to answer at
this time. "Along with the broader issue of the eventual role of the Treasury in
silver markets, these are matters which the projected Joint Commission on the
Coinage can better examine as further experience is gained and with the new
coinage system firmly installed.
Question 12. Why would the Treasury object to a standby power in the bill to
mint 40 percent silver coins if the cupronickel coins are proven unacceptable by
the public? Would it not be a wise precaution?
Answer. Careful Treasury staff studies, confirmed by independent studies,
make it clear that Treasury silver stocks will not be adequate to keep silver in
more than one of our coins. We firmly believe that the coins proposed will be
acceptable to the public. In the unlikely event that they are not, the solution
will not be, indeed cannot be, to switch to coins containing silver. In that event
we would have to propose to the Congress some other nonsilver alloy.
Question 13. How can the Treasury expect the Congress, which has the pri-
mary responsibility for providing coins, to make a wise choice about this legisla-
tion within a week or 2 weeks, when it took the Treasury many months? Would
you recommend a month's study of the problem by Congress?
Answer. I would expect the Congress to take whatever time it requires to study
the matter. The President's recommendations, as you point out, are the resulto
oi many months of study. We are making available all the technical information
and analyses which we developed during this time. I would expect Congress to
etud^ and review very thorougnly the materials we have developed, but of course,
the time required for this is a matter for the Congress to decide.
Question 14. Since you are so confident about the side-by-side circulation of
the cupronickel-clad coin, would you be willing to take a public opinion poll on
it, and Kive the results to the Congress before further action is taken on the
proposed legislation? If not, why not?
■dbyGOOgIC
42 COINAGE ACT OF 1965
Answer. In my judgment, it would be impossible to conduct a poll on this
subject. It would be necessary not only to give the polices samples of the coins
but alao to qualify tlie questions severely. Obviously, silver coins are more attrac-
tive than the new material and would be preferred, But you can't ask the man
on the street to assess the very complicated silver supi^y situation.. That is the
job of the Treasury, with the people's elected representatives passing Judgment on
our recommendations.
Question 15. You have said that the full faith and credit of the United States
wHl stand behind the new coins. Do you contemplate backing the cupronickel
coin with Government securities, or gold, as is the case with paper money?
Answer. The new coins, as is the case with the eiisting coins, will be freely
exchangeable for our paper currency. Thus, in effect the baoking for our coinage
is, and will be, the same as the backing for our currency. In the final analysis the
value of all of our money, coinage and currency, bank deposits, and the like, is
dependent upon the strength of the Nation's economy and not upon its intrinsic
value or the technical resources behind it.
Question 16. Did the Treasury study encompass an analysis of H.R, 4184?
How do you analyze its provisions?
Answer. We have analyzed 11. R. 4184, and we do not find the proposals in it
feasible. Essentially, it is our conclusion that we cannot count on enough silver
during the period of implementation of a coinage program to keep silver in more
than one coin. For this reason alone we are opposed to the bill. In this connection
I direct attention to the conclusions drawn by the Treasury staff study and the
Battelle study.-
H.R.. 4184 also'suSers from the following defeots:
(1) By changing the reserve requirements for silver certificates, it amounts to a
Krtial repudiation of the Government's obligation on this currency, which would
of doubtful constitutionality.
(2) By indicating at this time a monetary price tor silver of $4 per ounce, the
bill would have a tendency to generate increased speculation in, and hoarding of,
silver coin and bullion. This psychological pressure would be present in spite
of the authority contained in the bill to sell silver at the $1.29-plu8-per-ounce price.
The Chairman. All right. Mr. Gettys?
Mr. Gettys. Mr. Chairman. Mr. Secretary, you have atated that
public acceptance of the cupronickel coin3 seems to be assured. Do
you have any real basis for that conclusion, or evidence that they
will be generally accepted?
Secretary Fowler. The outward appearance of tie coin ia, of
course, just like the nickel that we are all used to today. The simi-
larity between the two in appearance would be, I think, quite striking.
The inscription — the engraving will be identical with present coins.
The most noticeable difference will be the fact that the e<^;e of the
coin will have a coppery appearance. To us this doesn't seem to be
such a radical difference.
Mr. Gettt6. If the prognostication proves to be incorrect, it
would more or less create pandemonium, would it not?
Secretary Fowler. It would be a right rough situation.
Mr. Gettys. I was just wondering if it would not be wise for
the Treasury to have standby authority maybe to mint some silver
content coins. Would that be acceptable?
Secretary Fowler. Well, I think it would have some other effects
that would be undesirable. We think it is very important here that
we take the decision now, at this time, to end the coining of silver
dimes and quarters.
Mr. Gettys. You have considered what I have referred to?
Secretary Fowler. That is right. If we had to turn to some other
alternative, I think the alternative would not he in that direction-
Mr. Gettys. Thank you.
The Chairman. Mr. Mize?
Mr. Mize. Thank you, Mr. Chairman.
■dbyGOOgIC
ObiSTAGt ACT OF 1965 43
Mr. Setretary, what is the melted down value of the present 50-cent
piece?
Secretary Fowler. About 46 cents.
Mr. MiZE. I am sorry that the new 50-cent pieces are to have any
silver content at all.
Is it a fact you are authorized to mint these new 50-cent pieces, but
you don't really have to, do you?
Secreta^ Fowlbh. Well, certainly there would be a considerable
degree of flexibility as to the timing, the quantity, and the pace.
Mr. MiZE. One other question. Are these new coins to be dated?
Secretary Fowler. The authority we are requesting is that we be
allowed to use as a date for a substantial period of years, a given date,
so that the premium on having one dated 1966 and another dated
1967, 1965, will be at a minimum.
Mr. MizE. Thank you.
The Chairman. Mr. Todd?
Mr. Todd. Mr. Fowler.
Thank you, Mr. Chairman.
I was noticing these coins in this pretty case here. .
I am skeptical of red lights at the meat counter and green lights
at the vegetable counter. I wondered if possibly Monday we could
see some coins not encased in anything if we promise to give them
back to you.
Secretary Fowler. I think we can have some. We will guard
them very carefully as they move around. But I think members
of this committee will have a little momentary, temporary distribu-
tion, so to speak, so you can feel the heft of it and turn it around and
look at it.
Mr, White. Would the gentleman yield?
Mr. Secretary some time ago I asked the Treasiuy Department to
strike some silver coins in the 10- and 25-cent denommations. I
understand that the coins were made, I understand they are avail-
able. I would like to have them for examination at the same time
you make the others available.
Secretary Fowler. Y^, sir.
Mr. Todd. Mr. Secretary, I have one further question.
Following the chairman's comments earlier on the legal tender,
would it be possible or legal to sign a contract which was payable in
silver coins? In other words, if I owed you a thousand dollars, would
it be an enforceable contract if you put m the contract the fact that I
was to pay it to you in 50-cent silver pieces?
Secretary Fowler. As far as I know — and I am advised by counsel,
I am not practicing my own law these days — there b no law to prevent
that.
Mr. Todd. Thank you.
The Chairman. Mr. CabeU?
Mr, Cabell, Thank you, Mr. Chairman,
Mr, Secretary, as soon as you reduce the silver content of the half
dollar below its present value, any other reduction becomes a matter
of degree — why not go on down to 20 percent or even 10 percent in this
effort to conserve silver? You could probably take a 10-percent total
silver content and, by reducing the thickness, could still provide the
appearance that you are seeking, could you not?
48-938— B5—
■dbyGOOgIC
44 COINAGE ACT OF 19eS
Secretary Fowler. I am told that there are technical limitations
on how far down you can be in silver content without really changing
very materially the appearance.
Now, it may be, as you indicate, this is a matter of some d^^ee.
I don't want to leave the impression that there is some very magical
quality about the 40-percent fineness. However, I think there are
hmitations, and we have come out with that particular figure in terms
of the quantity of production that is contemplated, and the quantity
of silver that would be required for a fine appearing quality coin.
If you reduced it to 20 percent — which would be quite mai^nal — you
would be talking in production terms of utilization of around 7 to 8
silvei
million ounces of silver, as against 15.
Mr. Cabell. But your objective has been to reduce it as low as you
thought appropriate.
Secretary Fowlbh. Yes, sir.
Mr, Cabell. Inasmuch as you are asking for standby controls,
why wouldn't it be wise to put those controk into immediate effect,
particularly with reference to exportation of our present silver coinage,
and then not wait until the horse is stolen before you start locking up
liie door?
Secretary Fowler. Well, my experience has been in the case of
controls such as these that sometimes they prove counterproductive
when they are instituted; they move people more or less in the op-
posite direction.
Mr. Cabell. You don't think by any chajice those who would
have that kind of an idea would have to wait for those controls to be
imposed to use or put those ideas into effect, do you? They are about
two jumps ahead of you now.
Secretary Fowlbh. AU I know is that, during our various emergen-
cies, sometimes a situation would be reasonably taut in an imcontrolled
state, and when you announced or instituted the control it got much
worse.
I think this is a mai^inal question, a marginal decision, that may
weU be a decision that we could take with reference to one coin but
not another. But we did want to leave some room in the request to
the Congress for the exercise of this judgment.
Mr, Cabell. I am thinking primarily of our present silver dollar,
where once you announce that there is not going to be any more of them
minted in the immediate future you are going to create a situation.
One further question, if I may.
You have in your Treasury stocks at the present time a very
definite quantity of silver dollars, a number of which are definitely
collectors items that represent a small fortune. Is it the intent of the
Treasury to keep those particular ones sterilized?
Secretwy Fowler. Yes, sir. There is no way for us to distribute
them equitably. In this quantity, they would disappear; they would
serve no useful purpose as a medium of exchange.
Mr. Cabell. Thank you venr much, Mr. Secretary.
The Chairman. Mr. Hansen?
Mr. Hansen. Thank you, Mr. Chairman.
Secretary Fowler, you have indicated you would not be resistant
to an amendment to this measure that would call for a 5-year mora-
torium on silver dollar coinage. What would be your attitude toward
a similar situation regarding the 50-cent piece so that you could get
in motion on the more crucial needs?
Digitized byGoOgle
COUfAOS ACT OF 1S6K
45
Secretary Fowler. Well, actually in our plans for jiroduction,
Mr. Hansen, we do plan to put that at the end of the line in our pro-
duction schedule. In other words, to build up the production of the
quarter first, which is the area that we would like to have supplied in
wholly adequate quantities and then move to the new dime. Then I
think I said around the end of 1966 move toward the 50-cent piece
in a quantity of production that would be adequate to justify its
release on the market, avoiding the problems we had with the Kennedy
half dollar.
I would naturally prefer to see Congress enact the President's
program as he has recommended, which does include a production
of tlie 50-cent piece in the fineness indicated, along the scheduled
lines that I have indicated here in my testimony, so that we could
move out in late 1966 or early 1967 with a production of the new
half dollar and a distribution at the appropriate time when it was
in quantity supply.
I think by this time the proposed Joint Commission on Coinage
would be in existence; it would be in touch with the ongoing problems
that emerge as a result of the program and could see wheUier or not
there is room and utihty and desu-abihty in our coinage system for
that particular coin. I think, therefore, I would be personally opposed
to any amendment that would have the effect of putting to one side
the proposal with reference to the 50-cent piece.
Mr. Hansen. One other question r^ardmg the 50-cent piece.
Have people, your stafE members made a study concerning the
extent to which other nations are using a 50-cent piece that is made
of a more base metal?
Secretary Fowler. Yes, I think that information is available. I
would like to supply it tor the record.
{The information referred to follows:)
Ccntntries having a Hlser coin — varying fiTiem
*««
Country
Weight
,„;i=5.,
Half dollar
11,2
4.9
Secretary Fowler. I think we can say that there are countries that
do have a coin which utilizes some quantity of silver; a prestige coin,
to use that word. The French, for example, have the 5 and 10 franc
{tieces. There are a number of other countries that use silver in at
east one coin.
France, West Germany, and Italy are the ones that come readily to
mind. They are followme a system whereby they have abandoned
silver for the lesser coins, out wiey have at least one coin containing
sUver.
Mr. Hansen. One further point.
People called by the fancy name of numismatists — I call them
collectors or hoarders — have in the last 5 years become extremely
active. I happen to have one in my own family.
■dbyGOOgIC
46 COINAOB ACT OF 1065
To what extent, in the jud^ent of your staff, do you folks believe
that this proposed l^islation is going to generate further activity on
the part of these people?
Secretary Fowler. Well, it is rather unpredictable to guess about
the apparently increasing natural instinct we have to be collectors of
one tmng or another, which has a very pronounced impact on our coin,
supply.
We are neither anti nor pro coin collectors.
We have designed this program so that the impact on proper and"
legitimate coin collecting as such will not be subjected to any inter-
ference while at the same time that process will not impede or ob-
struct or interfere with the distribution and availability of an adequate
quantity of the new coins so that the experiences that we have had, for
example, with the Kennedy half dollar, would not be duplicated.
We hope to avoid that in this program.
Mr. Hansen. Mr. Secretary, I was thinking more in terms of the-
effect this whole affair would have on existing coins and whether or not
you might find it necessary to put a Uttle more toughness into the'
process you discuss here on page 12, under section 5, dealing with the-
melting and exporting and treating of silver coins, and whether or not
you have ^ven any thought to the question of talang an action similar
to that wMch was taken back in the early thirties on gold.
Secretary Fowler. We did consider the question m terms of what
is called hoarding. That is a variant of the question, at least, that I
think you are asking. And we considered that a ^prohibition against
hoarding of coins denned in such a way as to make it an offense against
the laws of the United States would be tremendously difficult to-
administer and doubtful of success.
We tried to work out a formula, just to try it on for size, of what one-
would define as hoarding, and we came up against these kinds of
figures — that if 200 million Americans stashtd away 10 coins, 2 billion
would be removed from circulation. What is the normal supply for
the variety of business establishments that are involved in our com-
merce today? Different types of stores have different needs. A
chainstore operator versus ihe comer drugstore; a shoestore versus a
5 and 10.
So in establishing any guidelines or in advising Congress on how it-
should determine what would be an offense, or what boundaries the
discretion the Secretary of the Treasury should have in Issuing imple-
menting r^ulations, you would run into quite a complicated network
and would eventually be fraught with a lot of difficulty — a lot of
hardship, exceptions and other great problems of administration.
In fact, when you are all done, there might be a net loss of coins in
circulation because of only a little bit of Hoarding by a 'majority of
people, but if you really developed the fear of a shortage through the
rigid enforcement of hoarding, you might really have alot more coins
t^en out of active circulation by clearly legitimate commercial estab-
lishments simply as a hedge against shortages.
Mr. Hansen. Thank you, Mr. Secretary.
The Chairman. ^Ir. Harvey.
Mr. Harvey. Thank you very much, Mr. Chairman.
First of all, Mr. Secretary, let me apologize for my delay in being-
here this morning. I already had other plans I just could not change-
Secretary Fowler. This was rather sudden.
Digitized byGoOgle
COINAGE ACT OFlSafi 47
Mr. Hahtby. I thought you might enjoy the remarks one of my
&iends made this morning, when I told him I was coming to hear your
testimony. He said "I can sum it up — he is simply going to say
'beads I win, tails you lose.' "
Secretary Fowler. I have felt many times in this decisionmaking
process that the ways of decision were quite limited. It was a question
of whether we were going to wrestle a bear or a tiger.
Mr. Habvey. I omy have one question, in the time I have had to
look this over.
In section 5 you are authorized to make these rules and regulations.
In section 16 it provides a pretty stiff penalty of $10,000 or not more
than 5 years in prison for any violation of any rules or regulations.
•So that what we really have is a case where we are setting a penalty
for violations of unsown rules and regulations which are to be
presented at an unknown future date, and in an unknown set of
circumstances. It seems to me that is a pretty broad grant of
authority.
Now, I know bein^ a lawyer that you are— something like this must
l^oth^ you.
Secretary Fowler. I would be quite concerned, and that really is
one of the reasons for the so-called standby use here. I think it would
take quite a good deal of provocation in this area to come to a con-
clusion that one wished to invoke this kind of harsh authority which,
if invoked, has to be enforced if it is going to be meaningful, which
does raise questions of marginal cases where varying degrees of will-
iulness and intent appear.
However, I think what we are concerned with here is not a common-
place act that one might innocently without much thought be drawn
into, such as might be the case if you had an antihoarding provision.
Melting coins taltes quite a bit of equipment and quite a good deal
■of
Mr. Harvey, That is my next question. I don't know if yoiur
General Counsel is here— maybe he would prefer to answer it rather
"than you. But are the words you are talking about here^exporting,
melting, treating and so forth — capable of such definition that it
restricts this autnority?
Secretary Fowler. I think so. I think that if it became necessary
to issue these regulations, it would certainly be my intention to lean
lOver backward in seeing that the regulations confined the acts that
were subjected to the possibility of penalty to such clear and unnmtak-
able actions that there would be no mistake about it.
Mr. Harvey. Is there any danger, for example, of a coin collector
falling into the category of treating coins in anyway? I don't know —
I ask that out of ignorance.
Secretary Fowler, I certainly think insofar as the words "melting
and treating" are concerned, the type and quantity of equipment
that would Dfi involved to melt down substantial quantities of coins
and get the resulting silver in bullion form, that is something that
coula be pinned down. People would not accidentally faff into
difficulty. There are lots of stories down in my part of the country
about the Alcohol and Tobacco Tax Unit and mnocent people doing
a little moonshining on the side. I think everybody would know
what he was doing in dealing with the melting and treating of a coin.
Digitized byGoOgle
48 COINAGE ACT OF ISOS
Now, the question of exporting coins of course does raise, I think,
the question of what is the nonnal course of trade of a coin dealer
who has customers abroad. This may be an important ^art of their
business. I think we would have to consider the feasibility of pro-
visions in such regulations to the end that the normal course of traffic
between coin dealers and their customers abroad would not fall witlrin
the purview of these regulations.
Mr. Harvey. I am asking this again— do you have to come back to
Congress and this committee under any circumstances for approval
of these regulations, or are you granted the outside authority to do
that?
Secretary Fowler. No, I think the authority here would be
delegated without any such limitations. However, as the current
Secretary, I certainly would be not only willing but anxious to have
either informally or formally the views of the committee before taking
this step. I ttunk it would be a kind of a good testing, as it were,
whether ot not the regulations designed were in line with the intent
of Congress in this area.
Mr. Harvet. Thank you very much for your cooperation, Mr.
Secretary.
The Chairman. Mr. Secretary, before we conclude these bearings —
we are trying to finish by Tuesday if we can— -I wonder if it would be
too much of an imposition for you to appear here at 9:30 Monday
morning.
Secretary Fowler. Not at all.
The Chairman. Thank you, sur. We cannot possibly have a
meeting in the afternoon because we may have a bill on the House
floor and the committee members must be there. So we will meet at
9:30 Monday morning,
Mr. Moornead, do you have a question?
Mr, MooRHEAD, les, Mr. Chairman— just one question,
Mr. Secretary, can you tell us what is the purpose and what do you
think would be the effect of section 7, providing for a $1.25 floor on
the price of silver?
Secretary Fowler. The purpose of it was to provide against the
contingency that this particular program, if announced ana adopted,
should prove to be disruptive to the silver-producing r^on because
of a sharp drop in the price of silver. I, for one, do not anticipate
this but there are those that believe by enacting the lerislation pro-
posed, that there would be a sharp change in the attitudes of buyers
and in the price of silver. This would disrupt production and create
ah imdesu*able impact in a given r^on of the country. We therefore
felt it would be wise to have this authority in the act to avert any
possible unnecessary hardship.
We have of necessity to ask for a ceihng in another section of the
law in order to protect the existing coinage, silver coins that are in
circulation, as indicated. And we felt having requested the n^ht
to maintain a ceiling, we ought logically to ask for tne right to main-
tain a floor.
Mr. MooHHEAD. One other question, sir.
Is the coin vending machine industry satisfied with the proposal
contained in this bill?
Secretary Fowler. They will of course speak for themselves, but
it is my understanding from press dispatches that I have had an oppor-
DigitizcdbyGoOgle
COINAGE ACT OF I96S 49
tunit^ to review since the message came out that the org&nlzed
association that speaks for this s^ment of the industry has expressed
hearty approval and accord with the proposal.
Mr. MooBHBAD. Thank you, Mr. Secretary.
The Chairman. Mr. Asmey.
Mr. Ashley. Mr. Secretary, just a final question or two with respect
to the 50-cent piece and one or two other matters.
Is it your notion that the prestige of a coin is represented by the
amount of silver that is contained m the coin?
Secretary Fowler. No. I think that this is something of a
psychological matter, linked with this 173-year-old tradition. Having
a silver coin would lend an element of prestige.
I think the appearance of the new silver half dollar, from the
samples and tests that we have made, is very attractive.
Mr. Ashley. At what point would the appearance of the 50-cent
piece change? You are proposing a reduction in the amount of silver
to 40 percent. Where did the 40-percent figure come from? Why
not 20 percent?
Secretary Fowler. It is a very technical question. We are relying
here on technical advice. I think aome of the reports that are available
to you perhaps can answer it better than I can. But I am told that
the appearance of the coin changes very markedly as you move down
from the 40 percent silver toward, let us say, 20 or 15 percent. When
you reach that particular area, then it becomes quite different.
Mr, White. Will the gentleman yield at that point?
Mr. AsHLET. Yes.
Mr. White. Isn't it true that the appearance of the 50-cent piece
is very similar to the present 50-cent piece, and the reason for that
appearance is because it is a layered coin with an 80-percent silver
exterior?
Secretary Fowler. That's right.
Mr. White. Isn't it also true that the two coins are almost in-
distinguishable?
Secretary Fowler. That's correct.
Mr, White. And this was a mechanical— — ■
Secretary Fowler. So that the layer — you might say two pieces of
bread— has about an 80-percent content of sflver, and wierefore
resembles the present com so that they are really almost indistin-
guishable.
Mr, Ashley. I am curious — and I don't suppose we are going to
get any further clarification with respect to the fact that what is
Being proposed is a dual system of coins, really — one nonprestige,
utilitarian coins, of the nickel, dime, and quarter, aU essentially the
same content, at least in terms of silver.
Secretary Fowler. Right.
Mr. Ashley. Then for some reason I still cannot understand, we
decide that it is necessary, regardless of this severe shortage, the
critical shortage of silver to which you have testified, to have a 60-
cent-piece coin that it seems to me flies in the face of all the testimony
you have presented.
Secretary Fowler, Well, I don't know if I used "necessary." I
think it is desirable to have the 50-cent piece along the lines recom-
mended as a continuing part of our coinage system. And this is in
deference, as I have indicated to some extent, to tradition which is
Digitized byGoOgle
50 CQmAG£ ACT OF 19ft&
not to be ignored in these matters. It is in deference to the desire
of many people for a coin of appearance that contains silver, which
has been and always will be the most attractive metal from the stand-
point of appearance. I don't think there is anything like the law of
the Medes and the Persians that work in this particular aspect of
our decision. I think it is a debatable one. We debated it quite
at length and finally came down on the side that the availability
and utilization of this 50-cent piece, after the initial period of transi-
tion to the new coinage, was worth the dedication out of our available
stocks of approximately 15 million ounces or less a year for that
purpose.
Now, we knew that it would be a somewhat controversial recom-
mendation from the standpoint of silver users who do not want
1 ounce of silver to be used in coinage. I have said to some of these
gentlemen frankly, that the answer to their problem, whether it is
this year or next year or 10 years from now or 15 years from now,
is not going to lie in whether or not we continue to use 15 million
ounces of silver a year for coinage; it is going to lie in technological
changes and adaptation.
Mr. Ashley. All right, Mr Secretary. I just think your case
would have been more cleanly presented had you come in with the
same recommendation with respect to all the coins.
Seigniorage, Mr. Secretary, as I understand it, is the profit repre-
sented by the diflference in the cost of production of coins and the face
value of those coins. In the first 9 months of the last fiscal year, this
profit amounted to some $57 mifiion, and up to April 30 of this year
it is running at $87 million, according to the latest monthly summary
■of Federal cash transactions. This would be attributable to the big
increase in coin production this year.
With the introduction of these new coins, for which the ingredients
or materials will be considerably less in cost, I gather that the sei-
gniorage will be sharply increased.
Secretary Fowleh. It will be a very profitable operation. But,
of course, that is not the reason for the recommended changes.
Mr. Ashley. Can you give us — of course any forecast that you
would have would depend upon the rate at which the new coins are
to be introduced. Is there any plan or schedule that would reflect the
rate and volume at which the various new coins would be introduced?
Secretary Fowler. I think we can supply you that. Congressman
-Ashley, for the record. I do have some figures here.
Mr. AsHLET. For the record it would be fine.
Secretary Fowleb. Since it is a technical question I think supplying
:it for the record would be more satisfactory.
(The information referred to follows :)
EstiTtuUed ■produetion of Tteio ailoy coin
[In mlUkma ol itlece*!
, jUeal year 1986
VHeat
Ifront
Ukxilt
Total
tan—mhm-imii
,.S
1,430
l.«0
2.419
Du,iiz=db,Googlc
OOINAaE ACT OF 1B65 51
3 released. in early
a mid-iees.
Production of the new half dollar will be deferred until fiscal 1967, and will be
released when sufficient quantities are on hand. While a definite production
program baa not been dereloped for fiscal 1667, the mint will be in a position
to meet any foreseeable demand placed on it.
Mr. Ashley. Thank you very much. I must say, as others have
said, it is a great pleasure to have you here. You make an extremely
lucid and persuasive witness. I must say that I commend you
particularly because you have not been in office too long — it seems to
me the grasp of the subject matter which you reflect is very, very
reassuring.
Secretary Fowler. Thank you. There have been a few other
things to think about as well as coinage.
The Chairman, Mr. Fowler, I don't want to take up any more
time, but I feel we should have this in the record.
I notice at page 13 of your booklet on the "Treasury Staff Study
of Silver and Comage" you have this table 4, "Elstimated U.S. Silver
Consumption by Field of Use for End Product, 1959 to 1964," and
Sou show there the different purposes for which this silver was used,
ke batteries and alloys, medical uses, and so forth, aggregating 127
million fine troy ounces, in 1964. It was less than that in 1963, less
m 1962, less m 1961, less in 1960, and even less in 1959. So it has-
increased every yeai^-127 million fine troy ounces.
Now, out of that there is 40.3 million fine troy ounces that are used
for photographic film plates and sensitized paper.
la it your understanding that an effort is being made now to sub-
stitute something for these purposes where the use of silver will not
be required?
Secretary Fowler. There is, I am told, a good deal of scientific
effort going on hy some of the outstanding mraa in this particular
field. 1 am not m a position to appraise the possibilities of break-
throughs in this particular area, but certainly with the pressures that-
are on the supply of silver and with the problems ahead I would
hazard a judgment that this kind of effort, to find suitable substitute
materials, is likely to be substantially intensified, and of course it
would become a very crucial thing when and if any decision were
made by the U.S. Government to go out of this silver field.
Mr. White. Mr. Chairman, womd you yield at that point?
The Chairman. Yes.
Mr. White. I believe there is one other piece of information that,
should be added there. Is there not quite an effort being made in.
the recovery area of silver from hypo solutions?
Secretary Fowler. Yes, The research is along two lines — sub-
stitute materials and reclaiming and recovery.
Mr. White. And there is a possibihty of a greater d^ree of recovery
than they are now exercising.
Secretary Fowler. Yes, sir.
The Chairman. Well, thank you very much, Mr. Secretary, and
also the gentleman accompanying you. We dislike asking vou to-
come back Monday morning, but we would like to get this bill voted
out Tuesday if we can.
Secretan' Fowler. You want me to be here at 9 o'clock, Mr-
Chairman?
The Chairman. 9:30 will be fine.
■dbyGOOgIC
■See COINAGE ACT OF 196$
Secretary Fowler. Thank you, sir.
The Chairman. Thank you very much, Mr. Secretary.
The committee will stand in recess until 9:30 Monaay morning.
(The following information was submitted for the record:)
Anbweb to Questions Sdbmitted by Me, Patm4N to Bbchbtabt Fowi^r
QueationB. Aesuming you have considered the silver extraction industry in your
deliberations, whftt do yoti feel the effect of this legislation will be on this industry?
How will the emplovment situation and the silver mining be changed, and vnll
the mine owners still have enough economic incentive to continue in business?
Answer. The Treasury Department in its extensive study and dMiberationH of
the silver and coinage problems has made every effort to consider all of the con-
eequences which would arise from its legislative proposals. One ^leciflc require-
ment of the new coinage program was that it Bhould not inGict undue hardship
on any group, or sector of the economy. The present legislation meets that re-
quirement and will not inflict undue hardship on any group or sector of the
economy, including the silver producers. Section 7 of the draft legislation author-
izes the Secretary of the Treasury to purchase silver rained in the United States,
provided it is tendered within 1 year, at the price of $1.25 per fine troy ounce.
If enacted, this provision would offer silver producers an insurance against price
declines which they do not have at present. Silver producers have, of course,
already benefited from the 42-pereent increase in ^ver prices that occurred
between 1961 and 1963.
It is not anticipated that enactment of the Treasury's legislative proposals
would be Ukely to cause any sustained decline in the price of silver. However,
it is possible that the liquidation of speculative stocks of silver in an unsupported
market could cause silver prices to fall temporarily; and it would seem appro-
priate to shield domestic producers from the full impact of any sharp fall in price,
if contrary to expectation, such were to occur. It should also be noted that
under section 6 of the proposed legiHlation the Secretary of the Treasury is
authorized to sell silver not required to back silver certificates, but at a price
not less than the monetary value of silver. Hence, domestic silver producers
are assured that any sales of Treasury silver will not depress market price.
. Id regard to the legislation's effect on employment at silver mines, the Treasury
anticipates very little or no effect at all. In 1963, approximately 4,100 persona
were employed in the silver and gold-silver mining industry. These employment
figures refer only to those mines primarily producing silver-bearing ores and dtt
not include employment at base metal mines, such as copper, lead, and nnc,
which are responsible for producing about two-thirds of the domestic silver output
in any given year. Of the five major silver-producing States, only Idaho, which
obtains about 60 percent of its total recoverable silver from silver ores, is signif-
icantly dependent upon pure silver mining for output and employment. In the
other States, silver is largely obtained as a byproduct with other ores, and in these
other States employment depends mostly upon the price and demand for other
base ores, not silver. In any event, as described above, the legislation contaiafl
specific safeguards against any sharp fall in the price of silver. In view of the
large and growing demand for stiver and the assurance of relatively stable prices,
the position of the silver mining industry should be a favorable one.
For these reasons, the Treasury considers that the current legislation will have
little or no adverse effects relating to employment or economic incentives of the
silver producers.
(Whereupon, at 12:30 p.m., the committee adjourned, to recon-
vene at 9:30 a.m., Monday, June 7, 1965.)
■dbyGOOgIC
COINAGE ACT OF 1965
hlothday, june 7, 1965
House of Ebprbsbntatives,
Committee on Banking and Currency,
Washington, D.C.
The committee met, pursuant to recess, at 9:30 a.ra., in room 2128,
Rayburn House Office Building, Hon. Wright Fatman (chairman)
presiding.
Present: Bepresentatives Fatman, Barrett, Mrs. Sullivan, Reusa,
Ashley, Moorhead, Gonzalez, Hanna, Grabowski, White, Gettys,
Todd, Cabell, McGrath, Hansen, 'Widnall, Fino, Stanton, and Mize.
The Chairman. The committee will please come to order. Mrs.
Sullivan?
Mrs. Sullivan. Mr, Chairman, although I am a day late in doing
80, 1 want to welcome the Secretary in his appearance before the com-
imttee on a matter of great interest to the Subcommittee on Consumer
Affairs, which has jurisdiction over coinage legislation in the com-
mittee. I might say that Ghau-man Fatman and I discussed on
numerous occasions this year the procedures to be followed when the
administration finally made its report to us on its 2-^ear study in this
matter, and we agreed that the subject was of such nature that full
committee hearings were advisable. So I don't want anyone to think
that we were bypassed.
I am only sorry, however, Mr. Chairman, that after waiting so long
for this report — -naving had it promised to us first in February and
Uien April— that when it finally did come up it was on such short
notice that I had already gone to Omaha for hearings on Thursday,
Friday, and Saturday of the National Commission on Food Market-
ing — the only out-of-to ' " • ■ -
able to attend.
ing — the only out-of-town hearings of the Commission I have been
These are the hazards, I suppose, of ever leaving Washington on
any official assignment.
Since I could not attend the hearing Friday, I am grateful to the
Chairman for arranging this opportunity for those of us who were
necessarily absent Friday to question the Secretary this morning.
And when my turn comes for questioning, I do have some questions.
The Chairman. I will place in the record at this point a telegram
from Carl MiUman, president of Automatic Merchandising Corp.,
endorsing the new coinage bill; also a statement from the Silver Users
Association endorsing parts of the bill; and a similar statement from
the National Association of Photographic Manufacturers, Inc., New
York, and one from Thomas B. Hungerford, executive director
of the National Automatic Merchandising Association, endors-
ing the bill.
■dbyGOOgIC
54 COINAGE ACT OF 1065
(The documents referred to follow :)
Hon. Wright Patuan,
Hoiue of Reprtientatives,
Waahington, B.C.:
Strongl}' endorse the new coinage proposed by the President. No other new
coins will work properly in our machines causing public confusion and irritation.
Bequest you support this proposal since the welfare of our emi^oyees and our
cuBtomers ia dependent upon passage of this bill.
Carl Milluan,
Preaidenl, Automatic Merehanditing Corp.
Staisuent on tbe Prebident'b Coinaob Mesbage
Commenting on proposed legislation submitted to Congress concerning th»
metallic composition of U.S. subsidiary coins, John B. Stevens, chairman of the:
executive committee, Silver. Users Association, stated:
"The Silver Uaecs Association endc»'ses the action taken by the adminiatratioD .
in recommending the minting of dimes and quarters without silver.
"The association strongly opposes the recommendation calling for a half dollar
with a 40-percent silver content. Based on the number of these coins mintedl
laet year, this new coin would consume approximately 33 million ounces of silver,.
an amount which is almost equal to the entire U.S. annual productioD.
"Only laat week the administration reversed ite 9-day-old decision to mint
silver dolors because it was concluded they would immediately disappear into-
the hands of speculators and would waste 35 million ounces of silver.
"A silver clad coin, unique in monetary systems, would also disappear as fast
as minted, for it too would be another collector's item.
"No purpose would be served by the use of silver in this coin other than to U8»
up Treasury stocks of silver and ultimately force the Treasury into the silver
market where there is even now a 25 percent deficit between production and
consumption.
"Speculative interest in silver will be increased and will result in even ^eater-
hoarding of present silver coins at a time when mint facilltiee will be stramed to-
the utmost in the production of new quEu^rs and dimes,'as well as other coins.
"Every ounce of sOver used up in a ailver-clad coin would be at the eKi>enBe of
the industrial users of silver and the consuming public. Retention of silver m
the half dollar would again provide a vehicle for a price rise for the benefit of
silver-producing interests. It is unbelievable that the administration should
propose a new coin made of a material which is already in short supply in the-
National Association of Photographic Manufactubers, Inc.
The U.S. photographic manufacturers approve the President's legislative
proposals for the elimination of silver from dimes and quarters, but are concerned
about the retention of silver In the half dollar.
Arthur W. Taber, chairman of the Silver Committee of the National Association
of Photographic Manufacturers, Inc., and vice president-secretary of Peerless
Photo Products, Inc., expressed the concern of the industry that the retention
of any silver in coinage will only aggravate the existing shortage of this precious-
metal in the market.
Silver is vital in photography and the possible effect of this action will affect,
broad segments of the American economy using photographic products, especially
the printing industry, the use of medical X-rays, the graphic arts field, and th&
GovBmment iteelf .
■dbyGoogIc
COIMAQI! ACT OF 19SS
The vending industry wholeheartedly Bupporta the U.S. Treasury bill on
coinage and commends the administration for this practical and imaginative
solution to the problem of diminiatung silver reeervea.
Because the proposed coins will work reliably in present vending machines,
they will be welcomed by the millions of American consumers who mcreasingly
depend on coin-operated equipment for goods and services 24 hours a day.
The new coins have been thoroughly tested in existing coin mechanisms and
will work side by side with present coins in all coin-operated devices. This is
A critical requirement for more than half of the 12 million coin units now in opera-
tion hroughout the country.
From the 1.5 million Americans who obtain at least one meal a day from
vending machines to the young housewife who depends on the neighborhood
Jaundromat, coin-operated services are a vital part of the modem economy.
More than 30 billion coins are used by Americans annually in merchandise vending
machines alone.
The distinctive appearance of the new coins offers greater protection against
counterfeiting and the abundance of the new coin metal will assure an ample
■coin supply in the future for all retail businesses.
The vending industry urges passage of the bill because it provides an ideal
solution to the crucial coinage problem and assures an adequate and modem
■coin supply tor the American economy in the years ahead.
The Chairman. I have an unusual letter here which I think I will
read and then place in the record. It is from Hawaii.
"It seems to me the most economical way to conserve silver would
be to discontinue the coin^e of the half doUar entirely. Half dollars
are a nuisance. They are too much for the average tip. They can-
not be used in coin telephones. They are too large for most vending
machines. I would surest, first, elimination of the half dollar.
Then after testing the effect, consideration might be given to reducing
the silver content of other coins, if this should still seem necessary,
"Mr. John T. Harcourt."
(The letter follows:)
HoNOLVLu, Hawaii, June 4, 1985.
Hon. Wright Patman,
House of Representalives,
Washingtim, D.C.
Dear Mr. Patman; It seems to me that the most economical way to conserve
silver would be to discontinue the coinage of half dollars entirely.
Half dollars are a nuisance. They are too much for the avcraf^e tip. They
-cannot be used in coin telephones. They are too large for most vending maohineg.
I would suggest, first, eliminate the half dollar. Then, after testing the effect,
-consideration might be given to reducing the silver content of other coins, if
this should still seem necessary.
Sincerely yours,
John T. Harcourt.
Mrs. Sttllivan. Mr. Chairman, while we are inserting material
in the record, may I ask if you have the President's message of last
"Thursday included in the record?
The Chairman. Yes; immediately following the bill in the first
part of the proceedings.
Mrs. Sullivan. Then I wanted to ask permission to have the
"Treasury Staff Study of Silver and Coinage" also inserted in the
record, and the Battelle Report also. It just seems to me
The Chairman. Suppose we make that available to the members
of the committee, and then we will have the staff select the portions
that should go in. I doubt that we should put the entire study in.
Would you want it in?
■dbyGOOgIC
66 COmAOE ACT OF 1066
Mrs, Sullivan. Yes, sir; I believe the Treasury staff study and tho
Battelle Memorial Institute technical report are of such lon^-range
interest and importance to all who are mterested in the subject of
our coins and coinage — and that includes most Americans — that our
printed hearings on this hbtoric change in our coins should include
these valuable DaG)^;round materials.
The Chairman, ft covers the subject thoroughly. Let's put it in.
We will put it in the appendix.
Now, the members who were not here the other day I think should
be given first consideration, Mr. Barrett, and Mrs, Sullivan, Mr.
Beuss, and Mr. Cabell. Mr. Barrett?
Mr, Barrett, Mr, Chairman, I will pass my opportunity to ques-
tion at the present time to Mrs. Sullivan.
The Chairman. Mrs. Sullivan?
Mrs. SoLLivAN. I understand that on Friday the Secretary was
asked by Mr. Moorhead if the proposed solutions to our silver and
coin problems contained in this legislation were satisfactory to the
vending machine industry, and he replied that he beheved they were,
Since we apparently will not be calling witnesses from the industry,
I think it might be useful to have at this point in the record, with
the committee's permission, several communications I have received
over the weekend from two firms in St. Louis which are leaders in
this industry: the Universal Match Co., one of the biggest, and its
subsidiary, National Rejectors, Inc., which makes the sensor mech-
anisms which measure the weight, size, and electrical resistance and
conductivity of coins.
These communications rive clear evidence of the fact that the
Treasury has devised a solution satisfactory to that industry— and
I believe every congressional office received numerous wires, letters
and telephone calls from the vending machine companies expressing
concern on this point before the report was made public.
The Chairman. Without objection, they will be placed in the
record at this point.
(The documents referred to follow:)
Universal Match Corp.,
St. Louia, Mo., June 4> 196S.
Hon. Leo NO K K, Suluvan,
Banking and CuTrency ComTnitUe,
Home of Representatives, Washington, D.C.:
Universal Match Corp. strongly endorses the new coins proposed by President
Johnson aa contained in his message yesterday. The new coins will work side
by side with present silver coins and will require no adjustment to present vending.
machine mecnanisma for coins. Present coins will be in use for a long time and
it is very iBoportant that both types work in the miUions of vending machines now
in use by the American public. Failure of the Congress to adopt the coins pro-
posed by the President would Lead to great economic loss since there woula be
wide confusion on the part of the public using the machines, and it would be neces-
sary to make costly clianges in all vending machines which could lead to chaos in
this very important segment of the Amencan economy aa you know, we are one
of the leading manufacturers of automatic vending machines and the world's
largest producer of coin mechanisms for vending machines. As such, we employ
directly approximately 2,500 people in the vending machine manufacturinK
o]>erations and coin mechanisms for vending machines. These manufacturing
facilities, located primarily in the State of Missouri, are a major factor in keeping:
Missouri in the forefront of this growing and necessary industry. We trust that
you will give prime and favorable consideration to the approval of the President's^
recommendation.
■dbyGOOgIC
COINAGE ACT OP 1966 57
a helping our industry in the past and we are most
National Rejbctors, Inc.,
June S, 1966.
Hon. Leonob K. Sdllivan,
Smtae of Bepreseniatiwea, Waikinglon, D.C.:
As manufacturers of coin handling ecjuipment for use in vending machines,
we have been greatly interested in and vit^ly concerned with the recommenda-
tion of the Treasury Department with regard to new coinage material. We
realize that in your position as chairman of the subcommittee of the Committee
on Banking and Currency, you are also greatly interested in the present coinage
proposal. We are in complete accord with the recommendation by the Treasury
Department of the so-called sandwich coin material, since it wUl not only be
accepted side by side with present coins in all vending machines and other coin-
operated devices, but will be accepted without ai^ complicated or costly adjusts
menta to coin handling equipment. National Rejectors, Inc., has conducted
thorough tests of various metals and alio™ proposed as new coinage material,
but the material, as recommended in the Treasury Department proposal, is the
one which is properly and reliably accepted. Since you were successful in spon-
SOrii^ the antislug law several years ago, we are respectfully urging that you also
support and vote for the Treasury proposal for new coins. Thank you.
Emc Sokoi^
Executive Vice President.
The Chairman. They are favorable to Uie bill?
Mrs. Sullivan. Yes, completely so.
STATEMENT OF HON. HENKT H. FOWIEH, SECRETAB7 OF THE
TREASURY; ACCOUFANIED BY ROBERT A. WALLACE, ASSIST-
ANT SECRETARY; FRED B. SMITH, ACTING GENERAL COUNSEL;
EVA ADAMS, DIRECTOR OF THE MINT; FREDERICK W. TATE,
DEPUTY DIRECTOR OF THE MINT; AND JOHN H. AUTEN,
DEPUTY DIRECTOR, OFFICE OF FINANCIAI ANALYSIS—
Eesnmed
Mrs. Sullivan. Now, Mr. Secretary, I note the gre
the Treasury demonstrated in coming up with a solution for having
coins compatible in the existing vendmg machines. But perhaps not
all of the members know why this is so important from a Federal
criminal enforcement standpoint. I am afraid I had a lot to do with
that in the sponsorship of Public Law 87-667, 3 years ago, the slug
law, which makes it a Federal crime to use slugs of any denomination
in an "automatic merchandise vending machine, postage stamp
machine, turnstile, fare box, coinbox, telephone, parking meter,''
and so forth.
Formerly it was a Federal crime only if it involved a 1-, 2-, 3-, or
5-cent piece.
So perhaps it might be helpful to tell the conmiittee the extent of
the law enforcement problem Uncle Sam would have had if the
Treasury had not devised a new coin material with properties siniilar
to silver, so that electrical resistivity tests in the vending machines
could continue to reject the slugs easily.
So this is, thereforCj not just a matter of convenience to the vending
machine industry, is it?
■dbyGOOgIC
58 COINAGE ACT OF lfl6S
Secretary Fowlbh. No. It is a matter that really goes to the value
of a coin as a medium of exchange, from the standpoint of the classic
and traditional value. If the development of merchandising tech-
niques promises to continue to employ these various vending-machine
devices in a much greater degree — if the curve of utihzation continue
to go u^) as it has m recent years — it seems to me that it is not only
appropriate, but necessary, for the Congress and the Treasury, who
are concerned with providing the type of coinage that will serve the
Eurpose of a medium of exchange m the modem world in which we
ve, to try to adapt any new coin to the merchandising conditions
which surround us. Our coinage proposal is made not with particular
regard to any given group of manufacturers nor with regard to any
given group of distributors who utilize the vending macmne in their
establishment, but because of the public interest and the pubhc neces-
sity in many cases to resort to these vending devices, and the incon-
venience to the public that would be involved in developing coins
that woidd not be compatible and would not add to the law and
tradition and good manners and general honesty, and so forth, under
the saf^uard that the present machines provide in the technique
which you have referred to of resisting slugs and coins other than the
ones that are normally employed.
So looking at it from the overall standpoint of what is necessary
for the trade and commerce of the country, it seemed to us that we
should search for a substitute coin for the silver coin that would be
as close to compatible with the silver coin, and thereby make possible
the continued utilization and continued development of this method
of distribution. It was in that spirit and that attitude that Treasury
came down, you might say, for the particular coins that are recom-
mended to the committee now. Omerwise, I think we would have
had a long period of disruption of the utihzation of the current devices;
we might have had a period of doubt as to whether or not this par-
ticular form of distribution coidd continue to develop in line with
the needs of commerce, and it would have been a period of disruption
that would have caused us all great difficulty.
Mrs. Sullivan. Thank you. Mr. Secretary, I would like to pursue
the proposal in the bill for a Joint Commission. I notice that you
specify as members in addition to the Secretary of Treasury as Chair-
man, which is appropriate, the Secretary of Commerce, the Director
of the Bureau of the Budget, the Director of the Mint, along with the
chairmen and ranking minority members of the House and Senate
Banking and Currency Committees, one other member from each
House to be appointed by the Speaker and President of the Senate,
and four public members appointed by the President.
In Commissions of this nature, with Cabinet officers and other
high governmental officials serving, I believe the Cabinet officer often
assigns the responsibility to an assistant when he cannot personally
be present at a meeting.
Would a similar flexibility be given to the congressional members?
Could Mr. Patman or Mr. Widnall assign another member to attend
a meeting in his place, or is it your intention that onlj^ the principals
will actually participate, not assistant secretaries or assistant directors
and so on?
Secretary Fowler. I would think, Mrs. Sullivan, that the ground
rules of the operation of the Commission probably ought to be de-
DigitizcdbyGoOgle
COINAQB ACT OF 19«S J9
tormined by the Commission itself wben it meets and conrenes.
A certain amount of flexibility must neeessarily be retained insofar
as participation in meetings are concerned. I think we aU recognize
as a practical matter the tremendous demands for tltae that are
placed on both my office and the Director of the Budget and the
chairmen of the respective committees.
Certainly if I were serving on such a Commission and asked to
advise, I would think I would come out with saying that we wodld
hope the principals could be in attendance a good paj*t of the time,
but whenever it was not convenient for them to be there, th^ could
be represented by an alternate.
By the same token, I think it would also be wise to have an altera
nate available and familiar with the on-going work of the Commis^on
so that there would be the continuity that would be neceesary.
There might be rare occasions in which it would be desirable from
the standpomt of the Commission to en^lude staff from the room anil
exclude alternates, and just for the members of the Commission
themselves to deliberate and act. But I would hope when the
Commission was set up and in operation, that not only the Secretair:
and the Director of the Mint, but also the Assistant Secretary, who is
the channel from the Secretary's Office to the Mint, various staff
members of the staff of the Mint and members of our Office of Financial
Analysis could be available for the convenience and service of the
Commission.
Now, it goes without saying, thwefore, the chsirman and rankii^
minority member of the Banking and Currency Committee ough't to
have alternates that they could call on to attend and participate iq
theses^ons.
Mrs. Sdllivan. Well, it juat seemed to me that -this- ^lould he
spelled out somewhere, either in these hearings or in Ae formatioB
of the Commission, so that the ground rules were set. I raised this
question because I know how busy all of the principals are in their
official responsibilities and because of the common practice in the
Qovenunent of assigning assistants or alternates to sudi commission
meetings.
Secretary Fowler. I would think that would be very appropriate—
tmd perhaps some comments in the committee r^ort might clarify
eve^one's intention in that r^ard.
Tvu-s. StiLLiVAN. Thank you. My time is up.
The Chaibman. Mr. Reuss?
Mr. Rbuss. Thank you, Mr. Chairman.
I want to congratulate you and your associates, Mr. Secretary, on a
very progressive coinage program here. The logic of removing the
ffllver from the dime and the cjuarter, I think, is inescapable. But I
am so impressed with your logic I wondered why you did not apply it
to the half dollar.
How much would it cost the Treasury and the taxpayers to keep 40
percent silver in the half dollar, based on anticipated use?
Secretary Fowler. I think perhaps the major cost element to be
considered is the cost in the stocks of silver themselves. I imagine
that is your primary concern.
Mr. Rbuss. May I ask first, what will the new cupronickel quarter
cost? I know it is practically nothing. But what is it?
■dbyGOOgIC
60 COINAGE ACT OF 196S
Secretaij Fowler. Just one moment, sir. In terms of a thousand
dollars of face value of quarters, the cost would be $58.61.
Mr. Reobs. That is the new quarters?
Secretary Fowler. That is the new quarter.
Mr. Rbuss. Now, how about a thousand dollars worth of
Secretary Fowler, Of the old quarters?
Mr. Recbs. Well, let's have the old quarters, and then
Secretary Fowler. A. thousand dollars worth of the old quarters
would cost $935.27.
Mr. Rbuss. Coi^atulations. This is turning off the lights with &
Tfii^eance.
Now let's have this on the four-bits.
Secretary Fowler. Right. Now, the old 50-cent piece
Mr. Reuss. That is 90 percent silver.
Secretary Fowler, Right. $935.27 is the cost of the metal in
the old 50-cent piece — a thousand dollars worth of 60-cent pieces
contain $935 of silver.
Mr. Redss. The present quarter and the present 50-cent piece
are both 90 percent silver?
Secretary Fowler, That is right.
Mr. Reubb. And how about the new?
Secretary Fowler. The new one would be $432.37.
Mr, Reuss. Well, I have a bright idea for saving you $400 on
every thousand. Why don't we do that? Why don't we make a
cupronickel 50-cent piece, in order to achieve multimillion-dollar
economies? I guess before I pursue this I should ask you the antici-
pated use or coinage of 50-cent pieces, per year.
Secretary Fowler. I think our contemplated production schedule
for the new 50-cent piece would be about 100 mdUon a year. That
would be a high figure.
Mr. Reuss. A hundred million a year. Has somebody done the
arithmetic?
Secretary Fowlbk. We have done it in terms of the silver. You
see, our primary concern, Congressman, was arriving at the type
and kind of coinage that we thought would meet the coinage needs
of the country. This profit on seigniorage and the cost of metal as it
were is an incidental benefit that is achieved, not as a primary purpose
of this program.
Mr. Rbuss. Right. But any time you can get incidental benefits
which will work out at about $400, tunes 100,000, as I compute it,
it seems an incident worth groping for.
Secretary Fowler. It is a usefm figure for the record.
Mr. Reuss. I make it that the use of a cupronickel half dollar in
the future, such as the proposed cupronickel dune and quarter, would
save about $40 million a year to the taxpayers of the United States
over the proposal to use a 40-percent silver half dollar.
Secretary Fowler. Your shde ride is working faster than mine.
Mr. Reuss. It may not be working at all.
Secretary Fowlbr. I think that is what the mathematics may
work out to.
Mr. Reuss. If ray $40 milhou estimate is grievously in error
Secretanr Fowler. We will correct it for the record; yes, sir.
(The information follows:)
■dbyGOOgIC
COmAOE ACT OF 1965 61
Saoings in seigniorage of euproniekd half doUan over silver clad half doUart
Ck)st of metal in $1,000 face value of eUver clad half dollar $432. 37
Cost of metal Id $1,000 face value of cupronickel clad half dollar 5& 61
Difference - 373. 76
100,000,000 half dollars=S50,OO0,O0O face value.
$50,000,000 face value at a savings of $373.76 per $1,000 face value=a savings
of $18,688,000.
Mr. Redss. I make, then, a8 point 1, that though the aaving be
incidental, $40 million isn't hay.
Point No. 2, 1 note that already 50-cent pieces are, I believe, next to
silver dollars, the shortest item m our coinage offering, are they not!"
Secretary Fowler. That is right.
Mr. Reu&s. Aren't they about the scarcest?
Secretary Fowler. That is right.
Mr. Reuss. Well, isn't some sort of perverse Gresham's law likely
to operate whereby a lot of people who should know better but don't
are going to be a little leery of me new dimes and quarters and think
that this new half dollar is the one that still has 40 percent silver in it,
and isn't there going to be a tendency to take those off the market by
hoarding, and require the Treasury to coin more of them than antic-
ipated?
Secretary Fowler. Certainly insofar as I suppose those who buv
coins for their grandchildren and want them as family gifts there will
be some withdrawal of the 50-cent piece. Certainly we have witnessed
that in connection with the John F. Kennedy half dollar. They are
used as gifts and held more or less out of the mainstream of commerce.
However, if the new half dollars are made and released in the
quantities anticipated — in terms of the quantity production that we
have in mind— I believe their attractiveness for coin collection,
amateur as well as professional, will be less. And while certainly you
are quite correct in saying that there would be more of a tendency to
take a new 50-cent piece and to hold it than it would th^ new quarter
or the new dime, I would hope that the differences would not oe too
appreciable over a period of time as it became a rather commonplace
element in our coin system.
Mr. Reuss. Let me ask this question: In view of the indicated
saving to the Treasury, would the executive branch have any objection
if Congress should deem it wise to amend and improve and perfect
the legislation before us by treating half dollars on the same basis as
it is proposed to treat dimes and quarters?
Secretary Fowler. Yes; the answer to that is "Yes." We have
thouebt a good deal about this. We don't have any feeling certainly
of infallible judgment in this matter. But we did come to the con-
clusion that the new 50-cent piece would maintain a link in our
coinage with traditional metal tnat we bave come to accept as tradi-
tionaL It would provide — although there was some concern aboub
the use of the term the other day— a prestige coin. This is something
that other countries that have left silver seem to do. I don't mean
that we are just keepii^ up with the Joneses in this regard. But
many of the Western European countries that have now gone to
baser metals than silver for their subsidiary coinage, do retain a
particular coin with either 400 or 500 fineness of silver to keep some
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62 COmAQB iffr OP tft8S
And while I don't want to represent that the case is such a Bolid
one that it is not open to question or judgment — I think obviously
it is a matter for the Congress to decide— it is our positive recom-
mendation^ — and we feel it is important certainly for tne time being —
to maintain this link and to try, over a period of time, to see if the
new silver 40-percent fineness 50-cent piece cannot come to occupy
a, very real place in our coinage system.
Now, I would be reasouably sure, Congressman Reuss, that the
topic we are discussing here today is probably going to be a topic
that the Joint Commission would nave to consider siter a period ot
3 years, when the new coinage system is working, when there nas been
an opportunity to appraise the coinage problem in the context of the
overall supply-demand situation for silver, in what I would hope to
be a more normal frame of reference than the current situation where
we are all concerned with the first and the primaiy step of moving
out from a complete dependence upon a metal which doesn't promise
to be in adequate supply.
I think actually this question will be debated during these hearings.
We certainly anticipated that it would be. And that the resolution
of the Congress in tnis particular bill may not he the last word on it,
if it follows the administration proposal. But I think it is an effort
t^at is worth a trial until we see a little more clearly what the long-
term future of silver may be.
Mr. Reuss. Thank you, Mr. Secretary.
The Chairman. In announcing the members who have not inter-
rogated witnesses, I made an error by indicating Mr. Cabell — I should
have said Mr. McGrath.
When Mr, McGrath is finished, we will start all over again and give
each member an opportunity.
And we must note the appearance at this time of Miss Eva Adams,
Director of the Mint. She was unavoidably detained Friday, because
she had other official duties that prevented her attendance. Any
others who were not here?
Secretia-y Fowler. I believe that is all.
Mr, Wallace. Mr. Chairman, I wonder if I could add just some*
thing to what Secretary Fowler said about the half dollar, because I
think it is a very important part.
In working out the program, we had to take into account preserva-
tion of existing coins. Now, there are three types of possible hoarding.
One is hoarding of coins for the silver content. We beheve that the
program will prevent that by maintaining the price of silver at $1,29,
ana also by having standby authority to prohibit the melting or export
of coins.
The second type of hoarding is the numismatic, or speculator, who
buys coins in quantities in the hopes of increasing values. The fact
that we have nearly 12 billion of these coins in circulation will make
them anything but rare, which we think will take care of that problem.
The third type of hoarding is much more difficult to tackle.
Mr. Ashley. 12 billion 50 cent pieces?
Mr. Wallace. No; 12 biUion total silver coins. We are talking
about hoarding — the speculators taking silver coins because we would
not be making any more of them.
Mr. Ashley. It I may say so, I thought you were directing your
remarks to the 50-cent piece.
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COINAQB ACT OF IOCS 63
Mr. Wallace. No; I am talking about all silver, the hoarding of
silver, and the relationship of the 50-cent piece to the problem of
hoarding silver coins.
Mr. Abhlbt. Of the 12 billion in coins, how many are 50-cent
pieces?
Mr. Wallace. 1.1 billion.
Now, just to finish this point, Mr, Chairman. The grandfather-
type hoarding, whereby an uncle, father, grandfather or other relative
might say "Son, we are not going to have any more silver coins, so I
wanted to save one for you." The fact that we would be continuing
silver in our coinage we believe would lessen that type of hoarding.
If you were to go off of silver completely, such as Congressman Keusa
has suggested, there would be absolutely no silver in coinage, and we
beheve this would have a great tendency for people to hold back silver
coins, because there is no more silver in coinage. If you continue
silver in coin^e to this degree, we believe it wiU lessen that type of
hoarding.
The Ckaibman. Mr. McGrath?
Mr. McGbath. I have no questions, Mr. Chairman.
The Cbaibman. Mr. Fine?
We have just started questioning the witnesses again this morning.
Mr. Fowler testified Friday when you were not here. We have Mr.
Fowler back and Mr. Wallace, the Assistant Secretary, and Misa
£va Adams, the Director of the Mint.
Would you like to ask any of them any questions at this point?
You will be given an opportunity later.
Mr. Pino. Not at tins time, thank you, Mr. Chairman.
The Chairman. Yes, sir.
May I ask you, Mr, Fowler, about this Joint Commission. I con-
sider that a very important CommisEdon with the Secretary of the
Treasury as Chairman, and the Secretary of Commerce, the Director
of the Bureau of the Budget, the Director of the Mint, the chairman
and ranking minority member of each of the Banking and Currency
Committees of the House and Senate, one member to be appointed
by the President of the Senate, one appointed by the Speaker of the
House, and four public members.
I hope Mrs. Sullivan will take into consideration, in evaluating this,
that it is all right to have alternates up to a point. But I don't
think alternates should be allowed unless you nave a quorum. If
you were to adopt a poUcy like that, I am apprehensive that you
woidd wind up sometimes havii^ 14 alternates and not having any
members of the Board.
What do you think about that?
Secretary Fowler. That certainly is one of the ground rules I think
rou would have to impose. I think these procedures probably, as
indicated to Mrs. Sullivan, can perhaps be determined dv the prin-
dpals themselves when they meet in Commission assembled. With
these bodies it is always a problem, I think, of assuring the continu-
ity, as it were, of the voting members, of those who have the final
authority. And while I tliink the use of alternates is probably going
to be a practical necessity, I would think that the suggestion you
made^ that the meeting should necessarily include a majority of the
principals, is a safety factor that would be useful.
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64 COINAGE' ACT OF 1965
The Chairman. The Cominission will be important, as I see it,
regarding the needs of tfie economy for coins, the standards of coinage,
technological developments in metallurgy and coin selecting devices,
the availability of various metals, renewed minting of the silver dollar,
the time and circumstances under which the tmited States should
cease to maintain the price of silver and other considerations.
So the Commission will certainly be an important one.
Mr. Barrett, would you hke to ask questions? You are recognized.
Mr, Bahbett, Yes, sir. Mr, Chairman — I would like to ask Mr.
Wallace this question: Will this metal, after annealing, be able to be
rolled with the same equipment now in the mint in Philadelphia, or
will the new mint in Philadelphia acquire new machinery for rolliBg
in order to coin this metal?
Mr. Wallace. Mr. Barrett, the new mint which is underway in
PhUadelphia now will have to be constructed so as to accommodate
the cladding featiu"ea of the new material. It will require extra space
for that. It will require extra equipment and personnel for that
operation.
As far as the rolling is concerned, once the material is clad, a simi-
lar type of rolling equipment would be used, although of course in the
Philadelphia Mint we would plan to get new rolling equipment.
Mr. Bakkett. Let me ask you just one academic question. What
would be wrong with recalling the silver dollars and the half dollars
as we recalled the gold or the gold certificates, to get that silver out of
circulation and put it under our protection in the event that we need
it? What would be the expense?
Mr. Wallace. Are you talking about recalling all the existing silver
coins?
Mr. Barrett. I am talking about recalling the half dollars and
the dollars now coined in the alver content that we have.
Mr. Wallace. Well, the problem with the half dollars is that this
would cause a very tight supply of them, and if the Government
were to call them in in addition to other people
Mr. Barbett, I am speaking after you get a supply minted of the
new metals, and set a deadline for the return of the silver coins like
liiey did on the gold and gold certificates.
Mr. Wallace. My only hesitancy would be the fear that with this
in the offing, people would be holdmg them in moderate quantities,
and yet the total quantity being held off would be substantial, in the
case of the half dollar. Of course the dollars are already off. But I
think this, again, would be one of the questions that the Joint Com-
mission could consider after the new coinage is in effect.
Secretary Fowler. If I may add one comment to that — we felt, as
Secretary Wallace has indicated, that this is the type of question
which is much better considered subsequently by the Joint Commis-
sion after the new coinage is in and in volume form. At that time,
if you attempted to accelerate the normal process of simply retiring
old and worn out coins, the impact of any hoarding that might be
stimulated could be much better absorbed without any damage to the
coinage system that might cause you to lose a bit of control over the
silver, as it were, that is in those coins — but that rather than face
into that problem now and make even that tentative decision now in
connection with this program, we would prefer that it be deferred —
otherwise we might excite hoarding some of the existing coins that
otherwise people would not think of at this time.
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COIKAaE ACT OP 1905 65
Mr. Babbett. I assume that you and Mias Adams, as well as Mr.
Wallace, have given a great deal of thought to this situation.
Secretary Fowler. Secretary Wallace and Miss Adams have been
working strenuously on it for years, you might say^ — since the problem
emerged, I, mysea, have only been able to come close to it since I
assumed office on April 1. It has been a real problem, along with all
other things, to take the time that was necessary. I apologize for the
fact that there was an interregnum between April 1 and today, but I
really had to take a great deal of time, just to familiarize myself with
the issues that are involved in this program, and to take the necessary
decisions.
I obtained what I thought would be adequate advice from my
colleagues and dSsociates, and share the responsibihty with them of
the decisions that had to be made. And this did take some time.
I recognize, therefore, that the members of this committee will have
some time to take in resolving the questions that come to them. I
hope that— we tried to make available to you, Congressman, the fruita
of our labors and decisionmaking, not only as they appear in the
Treasury staff study but in the other reports, and in the President's
message, we tried to have a fairly full review of not only the answers,
but also the issues and the situation out of which the answers emei^ed.
But we have, I think, given this particular problem — internally in
the Treasury, at least — as careful a study as any problem I am aware
of in recent times.
■Mr. Barrett. Thank you very much.
The Chairman. Mr. Fino?
Mr. Fino. Mr, Secretary, I am very much concerned about what
might occur and what might follow if we start going off on these
different tangents, minting these new coins. My first reaction would
be that all of the other coins are going to start gomg out of circulation,
not coming back to the Treasury but going into the pockets, the safes
and the tm boxes of everyone.
Now, we have seen the experience we had with the Kennedy half
dollars. We minted about 250 million pieces. We don't see any
around in circulation, it is pretty hard to see or get any.
Now, I don't know whetner you are familiar — I introduced a piece
of legislation, I think it was in January, and this is in line with the
shbrtage, the coin shortage. During this period of emergency, in-
stead of |;oing into this metal business and cutting down tiie amount
of silver m the coin, that during this period of emei^ency the Treasury
Department should authorize the issuance of paper scrip, in denomina-
tions of 25, 50-cent pieces. Nobody is goim to hoard paper. It will
be in wide circulation, and you wouldn't have the problem that I
think you are going to be presented and confronted with if you start
minting these new coins.
I would like to have your reaction to that.
Secretary Fowler. Yes, I do not think there will be any more
tendency to hoard the new coins than there would be to hoard the
new scrip, because the new coins, when they come on the market, as
I tried to explain in the statement— and we did discuss it some on
Friday — the new coins will be produced in a very, very substantial
■quantity before any of them are mtroduced into the market. In other
words, you build up a very large inventory of the quarter, the new
nonsilver quarter, and do not release them into the market until you
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66 COtNAQE ACT OF 1965
have a very lai^e supply, with a follow-on heavy production, so that
the normal incentive to hoard the new coin will be avoided. There ie
a provision requested here also that we be allowed to use the year of
fii^t production for a period of time. Except for a few days or a few
weeks, perhaps, or at most a month, when it is a novelty, it will become
the most commonplace element in our medium of exchange, and I
would not think that there would be any more tendency to hoard
that than there would be to the new paper scrip. Indeed, it might
work out the other way.
If it were thought that the new paper scrip was going to be just a
temporary emedient, and it would be at some point sharply cut off,
there might be some tendency to put a few of them away, pieces
away, mst so that you had it for your collection.
Mr. Find. Well, Mr. Fowler it would be to the advant^e of the
Govenunent if l&O million people hoarded $100 of this kind of money,
and just put it away. Whereas, when they are hoarding corns that
have silver content, they ore hoarding something of value.
Now, let me ask you this. Is it your intention to just temporarily
mint these types of coins that you have now with this alloy in it?
Secretary Fowlbh. Oh, no, this is permanent. This is being pre-
sented for as far as we can see the coinage base for the dime and the
quarter.
Mr. Find. All ridit.
Now, we get back to the scrip question.
There is a pressing need to try to save as much silver as possible.
There is a great demand for silver. Wouldn't it be more advantageous
to the Government to hold onto all of its silver and just issue this
paper, until things sort of work out?
I think it would be a tremendous advantage to the Government if
we had hoarders among the people of this paper scrip.
Secretary Fowlkk, In the continued use of the mmting of the pres-
ent silver coins — which will go on contemporaneously with the pro-
duction of the new coins in volume — it is true that we will be con-
suming substantial amounts of the silver stock. We think, however,
in view of the present situation with regard to the coinage we still
have some need for further heavy production — that any temporary
shift at this time to the paper money, which would have a very short
life, 18 months perhaps, and would not be compatible with the
merchandising devices, the vending machines which I have indicated,
would add a new and more or less complicating factor to an already
complicated situation. The silver we have was more or less acquired
for, and its use contemplated as, coinage. Therefore, we felt it was
desirable to go ahead and mint the dime and the quarter, the one that
we have today, continue to mint it, until we had in sufficient quantity,
the new compatible coin of the nonsilver content, that could go into
the stream of commerce. Now, this again is a question of judgment,
sir, and it may well be that — it may be that we have made the wrong
judgment here.
However, I can only say it has been given very careful consideration,
and we have just come down
Mr. Fino, When you say careful consideration, you mean to the
paper scrip?
Secretary Fowler. That is right. Indeed, and some other alter-
natives.
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COINAGE ACT OF 1965 67
Mr. Find. I mean this is not a novelty. It is not something new:
Most of the European countries have that, don't they?
Secretary Fowler, Certainly some of those countries do.
Mr. FiNO. The Scandinavian countries ; Sweden, I think.
Secretary Fowleh. Yes, sir; it is used in other countries.
Mr. FiNO. I would like to see that, because this would be a nov-
elty — 25 cents in paper. And you have millions of American people
lioarding that. Wouldn't it be a boDanza for the Treasury De-
partment?
Mr. Wallace. Mr, Fino, a year ago this question came up before
the Fascell subconunittee, which was looking into the coinage aitua^
tion. At that time they took the testimony of various business
groups. They testified in horror at the idea of having to count all
this paper, wmeh would be floating around.
Another thing which entered into our studies was the fact that the
last time paper currency was used, for fractional currency, was during
the Civil War, where it was derisively referred to as shinplasters.
There seems to be just general agreement that, all things considered,
this would not be a very effective solution,
Mr. Find. Well, of course, it all depends on the amount of trust
that people have in the integrity of our Government. You fellows,
through our efforts, took the silver from the silver dollar. No one
paid any attention to it. They have confidence in their Govern-
ment — they know the money is worth every dollar it says it is. The
same thing applies to scrip. If you had 50 cents or 25 cents scrip
or even 10 cents scrip, as long as Uncle Sam is behind it — I don t
blow for how long — ^but at the present time as long as Uucle Sam is
behind it, it still had the value that it should have.
Mr. Gbttts. Will the gentleman yield, please?
Mr. Fino, the thought occurs to me — what would happen to the
vending induatoy with paper money?
Mr. Fino. Well, they could pump out all kinds of coins without
any silver in it, if that is the problem. It doesn't have to have
silver. All it has to have is some amount of electrical properties to
make those machines work— ^just like we have in New York City,
turnstile coins— those things have a certain amount of electrical
froperty that makes the machine work. So that is no problem,
am trying to save the Government all of this worry and concern
about the silver. I say leave the silver alone, stock it, pile it up,
and let's get some paper out and take care of this problem.
Secretary Fowleb. I think, Mr. Chairman
Mr. Fino. I was just told my time has expired.
Secretary Fowler. I think for the record I might just include the
comments in the sixth report of the Committee on Government
Operations.
The Chairman. If you think it is important, it will be placed in
the record.
Secretary Fowleh. It is on page 29, and carries over to the top
of page 30 of that report. It is House Report No. 194 of the 89th
Congress.
The Chairman, We will be glad to have it in the record.
(The information referred to follows :)
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68 COINAGE ACT OF 1965
while the procesuug of ooine to meet severe shortages takes considemble time,
scrip, in large amouate, can be printed quickly. It could be held in stock at
Federal Reserve offices, in readineaa for use in the event of a shortage. Some
companies have wanted to issue scrip of their own for use during the shortage,
but their efforts have been considered usurpations of Government powers.
While there was support at the hearings for the issuance of scrip by the Treasury,
these objections were raised; The impracticability of counting individual pieces
of paper with the rapidity with which coins can be counted; the relative ease of
counterfeiting such paper, the inabihty to substitute scrip for coins in vending
machines, parking meters, and other coin devices; and its very short life, which
would be costly to the Government. From the Treasury's standpoint, the
Elicy questions wlitch would be involved in determining whether or not to seek
dslation which would authorize it to issue scrip apparently had not been con<
Bidered.
The Chairman. In order to clarify the record, this fractional cur-
rency was put out about a hundred years a^Oj if my information is
correct. .Aid some is circulated even now, is it not, Mr. Secretary?
Secretary Fowlbb. I am not famiUar with it.
The Chairman. You seldom see any of it. But collectors have it.
Secretary Fowler. I would think so.
The Chairman, I assume under existing law it could not be done.
Mr. FiNO. In what denomination?
The Chairman. Fractional currency: 10 cents, 25 cents, 50 cents.
And about Uncle Sam being behind this, Mr. Fino was not here the
other day, but I think we made a good case, showing that all this
money is l^aJ tender, and being l^al tender it is good for the pajrment
of all debts, public or private. And, of course, the debts are rather
large now: about $1.3 trillion. And anything that is good to pay
debts, and that people must accept in payment of debts and taxes,
public and private, I don't think there is any question about the
money not being good. Mrs. Sullivan?
Mrs. Sdllivan. Mr. Secretary, your predecessor thought 26 million
Kennedy half dollars would satisfy the initial demand, so there
would he no rush for the coins and no hoarding or speculation. He
was just about as wrong as could be. The mint has turned out over
10 times that many, and vet none of them show up, except rarely.
The drugstores sell them for $2, with a 39-cent keyring. You were
asked, I beUeve, whether any steps were contemplated to assure
that the new coins would not oe diverted. And you said, I believe,
there would be so many available from the start that thia would be
no problem. I just hope that you are not falling into the same trap
that Secreta^ Dillon did on the Kennedy half dollar.
Secretary Fowler. I certainly want to qualify that "no problem."
I hope that we can minimize that problem by quantity production
and mitial quantity distribution, so that we don't get into this pattern
that unfortunately occurred at that time.
Now, I could as easily be wrong as anyone else. But we do think,
looking back on that experience, that it would be wise in the future,
in issumg a new coin, particularly one that might be susceptible to
collecting, to have a very large quantity of it initially issued so that
there would always be a possibdity that anyone who wanted one
would be able to get one in the normal course, shall we say.
Mrs, Sullivan. I asked Miss Adams this question once before,
and she was rather horrified at this idea, but why couldn't the Treasury
defeat this insatiable demand for bright shiny new coins to be hoarded
away for future speculative numismatic value by turning out for the
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COINAQS ACT OF 1*65 69
remainder of the shortaee period coins which have heen dipped in
some sort of solution to aarken or mottle them, so that they are not
possibly of any attraction for fut»u"e collectors? They could be made
to look drculated even if brand new.
Secretary Fowler. Anything that is different the collectors might
find ^-eat value in.
Mrs. Sullivan. They would be looking for the dirty ones, then?
Secretary Fowler. That is right.
Mrs. Sullivan. I want to ask you about the dates on these coins,
Mr. Secretary. You said in your statement Friday that the coins
would be dated as of the first year of their issue, and that would
mean probably 1966, But the bill pves you authority, I believe, to
continue the 1964 date, is that correct — in section 9?
Secretary Fowler. Yea. That is the significant part of it, I
think.
Mr. Wallace. The bill would provide the Secretary authority to
start with the date of coinage or issuance and continue it until he is
convinced that there is no problem of coin shortages.
Mrs. Sullivan. Wouldn't it be advisable to continue using the
1964r date if the half dollars so strongly resemble present coins, and
if the dimes and quarters are also so close to the present ones, except
for the edge? In fact, if you followed my advice and roughed up or
dirtied the coins a bit, no one casually receiving one of them woidd
have any occasion to even notice the difference. Isn't that so?
Secretary Fowler. We did talk about continuing the 1964 date at
some length. I think it is a point — it is not a black and white question
whether it would be more desirable to use 1966, 1965, or 1964, but
the particular provisions I think that we would now request is that,
notwithstanding the pertinent section, all coins minted from the date
of enactment shall be inscribed with the year of the coinage or issuance
unless in the judgment of the Secretary of the Treasury such inscrip-
tion is likely to contribute to a shortage of coins, in which case the
particular coins involved may be inscribed with the last preceding year
whose date has been inscribed on coins of the same denomination.
Mrs. Sullivan. So you could continue, then, the 1964 date, if you
felt it was de3ira,ble?
Secretary Fowler. Either 1964, 1965, or 1966, or whatever the
date of issuance was. It is optional.
Mrs. Sullivan. I have some questions for Miss Adams, but my
time is up.
The Chairman. Mr. Reuss?
Mr. Kbuss. Mr. Secretary, I think the presentation on pages 14
and 15 of your testimony, on the protection of existing silver coinage,
is impressive. You dispose of one hazard, that there will be hoarding
in anticipation of a com shortage during the production period for
the new coins, and you point out, I think, quite properiy, that your
production capacity would be so impressive that you could beat
that one.
You then point out vour abihty to control the melting down prob-
lem by two methods— ^y maintaining a $1.29 an ounce offer to sell,
and secondly, as a find resort, instituting direct prohibitions over
the melting down of silver coins if you need to.
I think as far as it goes that answers it pretty well.
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70 eOBfAQB, ACT OF 1865
But what about the third possibility, which I don't think is a very
real one — that a numismatic craze would cause people to hoard all or
part of this 12 billion presently circulating silver corns?
I would like your answer.
My tentative one would be if they do that, great. Instead of the
stuff coming into the Treasury in 25 years, it m^ht take 50 or a
hundred years, but meanwhile the Treasury is doing just fine, it
issues the new coinage as needed, and suffers no loss.
Secretary Fowler. Well, insofar as there is a risk of hoarding of
the existii^ coins, we believe that the decision recommended to the
Congress, to continue the existing coinage alongside of the new coinage
for awhile and then to cease the production of the old coins, but
still, diuing this period of transition, to have it generally understood
that the old coins would continue to be in circulation until some sub-
sequent decision might be taken by the Government to accelerate
their withdrawal, wUl diminish any tendency for people to grab up,
fou might say, the existing coin^e during the period of transition.
f you are going to face the problem of possibly withdrawing the exist-
ing coins worn circulation m any massive way, or accelerated way,
that is something that should be done well after the new system ie
installed and is operating, and everyone is generally used to it.
Mr. Reuss. From where we sit now, Mr. Secretary, is it not likely
that this country could allow the old 12 billion coinage to circulate
for its 25 year life, or whatever it is
Secretary Fowler. For the full 25 year life, that is right. Twelve
billion coins is a lot of coins — even in terms of
Mr. Rbuss. In the light of that, what becomes of the ai^ument
that it is necessary to keep issuii^ a 50-cent piece with some silver
in it to take the pressure off the 12 billion pieces circulating? I
shouldn't think there really would be much pressure on that.
Secretary Fowler. I thmk there is probably more of a pressure
on the 50-«ent piece than on the other kind, althoi^h anyone who
wants to save a silver coin — the grandfather type of collector — I
hesitate to use the word "hoarder," because I don't think that is the
thought — but the person who wants to put some silver coins away
for gifts, for the children or grandchildren, wiU always know he can
get a new 50-cent piece which has silver in it, as it appears here in the
exhibit. There wiU be no need or desire to hoard or save silver coins
generaUv) because silver is continued in the half dollar.
Mr. Reuss. He would also know that he can also get an old 60-
cent piece in about the same ratio to old quarters and dimes as the
new.
SeCTetary Fowler. The two things I think working together
would be continued circulation of the existing coinage, 12 billion
silver coins, plus the fact that there is a new silver type coin constantly
coming into circulation. If the instinct to hoard sdver coins can be
arrested or retarded in any way, I think it would be through that
device — that combination.
Mr. Reuss. You don't think there is class legislation deseed to
benefit 50 cent numismatists at the expense of dime and quarter
numismatists?
Secretary Fowler. It was not so designed.
The Chairman. Mr. Stanton?
Mr. Stanton. Thank you, Mr. Chairman. I have one question
for Miss Adams.
Digitized byGoOgle
COINAOE ACT OV'IOSS 71
Miss Adams, I have been contacted for the last several months by
representatives of the metallic powder industry. They happened
to be in Washington the date the PrMident'a message came over. I
showed them a copy of the bill. They were very happy on the estab-
lishment of the Joint Commission on Coinajre. I informed these
people I felt this was the organization that they would work with
m pursuing their particular objective of pursuing the idea of moldiDg
metal powders into coin blanks. I just wondered if you would darify
the view. Am I correct in that— that this Commission would l>e
one of those studying this?
Mias Adamb. I am sure, sir, that is the purpose for the Joint Com-
misfflon on the Coinage— is to keep in step with, to be familiar witii,
to weigh and give consideration to these new developments which
have occurred in these fields.
We, too, have talked with representatives of these companies. We
have tried throi^hout to be very certain that every potential material
was considered.
Now, they, themselves, have been working toward improving their
techniques, and the potential of their own materials. So certainly
this should be watched along the way. And I am sure the Commis-
sion — I am speaking not for the Chairman of the Commission — but I
am confident that would be one of the things which it would be their
purpose to investigate.
Mr. Stanton. They left me with the impression they are not
ready yet to present this themselves.
Miss Adams. I think, that is quite true, sir.
Mr. Stanton. Thank you, Mr. Chairman.
The Chaihuan. Yes, sir. Mr. Ashley?
Mr. Ashley. Mr. Secretary, don't you think we can say that
within the next 25 years we can anticipate the disappearance for all
intents and purposes of our present silver coinage?
Secretary Fowler. Yes — I think depending somewhat on the
decision of the Congress as to the future of the 50-cent piece and the
subsequent decision, somewhere ahead, on the provision about what
ultimately happens to the silver dollar.
Mr. Ashley. We can expect the disappearance will be speeded up
toward the end of the period, wouldn't you say?
Secretary Fowler. Yes, I think there will be that time when it is
apparent they are about to disappear, then there will be an accelera-
tion of acquisition among those who want to hold them for collection
purposes.
Mr. Ashley. And, of course, this is true ot 50-cent pieces, our
present 50-cent pieces.
Secretary Fowler. That is r^ht.
Mr, Ashley. And it this disappearance accelerates, of course the
production will be increased to compensate for that, wouldn't this be
true?
Secretary Fowler. Oh, yes, the production of the new coins would,
by that time have taken care of the Nation's coin needs. Perhaps it
vnll be feasible long before to reduce the volume of the mitial pro-
duction of the new coins, which will be at a very high rate initially,
to really put the coin shortage to rest once and for all.
Mr. Ashley. But what we are talking about is the manufacture of
12 biUion new coins, really, or the increased amount over and above
12 biUion that is going to be necessary for our growing population.
Digitized byGoOgle
72 COINAQE ACT OF leOC
Secretary Fowlek, That is ]%ht.
Mr. AsHLBT. It just seems to me that, in connection with what
"Mr. Wallace said, that we are trying — the tiinking with respect to the
three reasons that you mentioned, Mr. Wallace — silver content,
fflieculative value, and so forth — that the speculative value realty —
tne speculative aspect of it, over the long haul, can be rather consid-
erably discounted, because we are talking about a dbappearine com-
modity, disappearing entity, namely, silver coins. Why would you
be concerned about whether they disappear in the next 5 years or the
next 25?
Secretary Fowler. Well, I think certainly our primary concern,
speaking from the standpoint of the Treasury, is that we want to do
everythuig we can to be sure that these existing coins are around
during the next year, ^ or 3 years, while the new coinage production
buildup is underway.
I thmk after a 3- or a 5-year period, the decision about what happens
to the old existing coinage is more closely related not to the coinage
problem but to what the Government wants to do about silver as
such— whether it wants to stay in the silver business.
Mr. Ashley. Your principal consideration, I take it, Mr. Secretary,
is the utilitarian consideration.
Secretary Fowler. Right, I think this is one of the reasons we
should iiave the Secretary ot Commerce on this Joint Commission,
because the question of what happens to the silver using industries
will be an important consideration in connection with whatever you
de(ade to do about the existing supply of these 12 biUion coins that
are then in circulation.
Mr. Ashley. Now, do we need one or two prestige coins, Mr.
Secretary?
Secretary Fowler. The recommendations of the President can be
properly interpreted as saying that we need at least one, and that the
decision as to whether or not we need two, namely the silver dollar,
as well as the half dollar, is a decision that can better be taken some
time later, after this silver supply and demand situation comes into
focus. Certainly it is not practical to distribute at this time a small
amount of silver dollars — they would not serve a coinage purpose;
they would serve another purpose. Therefore, the decision as to
whether or not there wUl be a further minting of silver dollars is one
that we wished not to take at this particular time, at least in submitting
a recommendation.
Mr. Ashley. Well, if you persist, and if the Congress wanted to
persist in the proposal tor the new 50-cent piece, I don't quite see how
we can help out really label both the silver dollar and the 50-cent
piece as a prestige coin, at least based on the experience we have had
with the Kenneov silver half doUar. Is there any measure of howmany
Kennedy silver half dollars are actually in circulation, being used?
Secretary Fowler. I don't think there is any accurate measure,
Mr. Ashley. We do know there has been some 240 milli on
Secretary Fowler. 274 million, as of April 30, 1965.
Mr. Ashley. 276 million minted — as gainst an original estimate
of somewhat less than 30 milhon.
What was the original estimate as to how many would be minted?
Secretary Fowler. I think the 30 million, actually 26 milhon, were
just for initial distribution. I don't think there was any ceiling fixed
at the time of the initial adoption.
Digitized byGoOgle
coinage: act op loes 73
Mr. Ashley. If the new half doUar is the only coin with a signifi-
cant amount of silver in it, wouldn't you expect the same kind of
hoarding to take place, unless they are introduced in such volume,
really over and above the utiUtarian purpose?
Secretary Fowler. 1 think the difference between the silver content
is a very significant one.
The new 50-cent piece would have only about 20 cents worth of
silver. There is a very considerable difference there, In its attraction
for what I would call the speculation or hoarding that has to do with
the price of silver.
Mr. Ashley. But isn't it possible you may have to have two or
three times as many 50-cent pieces of the new variety in order for
that 50-cent piece to serve the utilitarian purpose because of the fact
it is the only coin with a respectable amount of silver in it?
Secretary Fowlbb. I would say that there is some possibility that
you would have to have more than you would ordinarily produce in
order to make it a circulating medium, and to exhaust
Mr. Ashley. And wouldn't this increase as we get toward the end
of the 25-year period where all of the silver coins are disappearing
except the 50-cent piece, the new SO-cent piece?
Secretary Fowleb. Well, I think that would depend a lot on what
had happened to the price of silver in the meantime.
Mr. Ashley, Thank you very much.
The Chairman. Mr. Gonzalez?
Mr. Gonzalez. Thank you, Mr. Chairman.
Mr. Secretary, since Mr. Fine was talking about paper currency,
I have a good supply of wooden nickels left over from my caiupaim,
and I might hke to interest you in a good supply of wooden niekws,
But, seriously speaking, it seems to me that in bringing about a
transition to the new coinage, the big problem would be the present
problem — -and that is safeguarding the Treasury's adequate supply
of silver. Would you agree with that?
Secretary Fowleb, Yes, I think this is certainly one of the real
overriding considerations in moving from the one system to the other
without encountering any coin shortage on the way.
Mr. Gonzalez. Well, do you believe, then, that the biggest problem
in this transition period, assuming we enact this, woidd be raising
adequate safeguards against hoardmg?
Secretary Fowlek. Welt; I will have to answ^ that question this
way. I think this is a big problem. But I think that the choice of
means to avert or to retard or to arrest the tendency to hoard is a
fairly subtle business. As I indicated the other day in answering a
similar question, sometimes the excessive use of controls and of mak-
ing a fairly dramatic thing out of this has a coimterproductive ^ect.
And we would hope that the assurances that were outlined in the
statement about protection of the existing coinage would avert or
arrest or retard this tendency certainly during the period that the
new coin system is coming into operation.
I don't think it can ever be completely averted over the long 25-year
pull, as my colloquy with Congressman Ashley indicated.
There may come a point — ^when the Government has decided, in
effect, to withdraw the old coins from circulation, or when the 25-year
period or whatever period of maximum use seems to be approaching
an end, somewhere in this period, between 5 years and 25 years — when
Digitized byGoOgle
74 COINAGE ACT OF 1965
there will be this inevitable tendency of people to accumulate for
remembrance sake and for collections and whatnot some of the old
coins.
Now, what happens to the tendency to collect these old coins
because of their silver content will depend a lot upon what happens to
the price of silver after this transition period, and that, in turn, will
depend a good deal unon decisions that we don't surest the Congress
take now, but that it take sometime later after the new system is
inaii^rat«d.
Mr. Gonzalez. However, though, there are some threats in the
immediate future — ^the nossibihty of a run on the Treasury through
the redemption of silver certificates. Is there anv possibility at all
there? Anybody holding a certificate today can redeem it, can he not?
Secretary Fowler. Yes. We have enough silver to take care of
that situation, and have a goodly supply left over. So we are not
too apprehensive about that.
Mr. Gonzalez. In other words, you feel that the supply ia adequate
to continue a rate of redemption and, at the same time, fulhll the
coinage requirements?
Secretary Fowleh. Yes, sir.
Mr. Gonzalez. And since the Government is still in the silver
market — I was very happy to hear you say that eventually perhaps
it would not be, and I guess this is a solution that we would ultimately
be traveling toward. But in the meanwhile, I am correct when I
say that any holder of a silver certificate can redeem the silver cer-
tificate, r^ardless of his nationality or the ultimate use of that silver
he has so redeemed.
Secretary Fowleh. That ia right,
Mr. Gonzalez. The reason I ask this is that I was across the border
recently, and went over to a shop in Mexico, and I saw some silver cer-
tificates on sale for $1.65, American money, with a picture of Presi-
dent Kennedy instead of the usual figure — in other words, it was a
Kennedy dollar they were selling for $1.65, They cut out a picture,
and pasted it on the dollar. I don't have it with me, because I left
it back home. But I notice that every one of these dollar bills on sale
were silver certificates.
Now, what I am getting at is that conceivably a Frenchman could
come over and redeem any number of silver certificates, get the silver
from the Treasury, help deplete its stock, take it to France, and ulti-
mately this silver bullion would be converted to French francs. And
what happens there is a real good source of free foreign aid for France,
becauseif that bullion is ultimately struck into franca, it increases from
its $1.29 per ounce value in the United States to over $3 its monetary
value as a franc.
Now, is there anything we can do to put a stop to this kind of
practice?
Don't you feel alongside some of the recommendations the Presi-
dent is asldng now that we ought to reinstate the transaction tax, for
example, andbave some export controls, such as the President is re-
questing now as a standby request?
Seeretaiy Fowler. In view of the general world market situation
today in silver, we are reluctant to ask for that and to go into export
controls on silver bullion or silver in that form, which is, I guess,
what you are talking about, because we think it would lead very
Digitized byGoOgle
COINAOE ACT OF 1«»5 75
quickly to a, two-price Bystem -with, all the attendant black-market
and gray-market type of operations that would be very disturbing.
We don't see currently m the world market situation the kind of
practices that you have indicated.
Now, they could develop and they could occur. But I really believe
in a kind of letVnot-rock-the-boat attitude, and take these things
oidmly as tte r^ht approach now.
Mr. Gonzalez. In other words, you don't see any real apeculativ©
effort at this moment in the international market. I don't know what
we can do to control the internationfJ market. But tJiere is a lot
#6 could do to control the domestic-
Secretary FowLEB. That ia right.
Mr. Gonzalez. I just wonder if we have any idea of how much of
this redeemed Treasury silver is going out of the country, such as to
France, for example.
I wonder how much of our American silver is going into their
new minting of 20-franc pieces.
Secretary Fowlbh. Our export figures on silver indicate that for
1964 we exported 52,893,000 ounces to the United Kingdom, 1 5,481 ,000
ounces to France, 10 million to West Germany, and there are figures
for all other countries — but the total exports, 109 million ounces.
Mr. Gonzalez. I notice in this little booklet, which interestingly
ffliough had some various statistics put out by Handy and Harman,
and I think it was sent to me some time in January — it made a very
emphatic statement. "For the first time since the lend-lease ship-
ments of World War II, the United States was a net exporter of
silver."
Secretary Fowler. That is right. Last year we imported, I
understand, about 52 million ounces of silver.
Mr. Gonzalez. My time has expired, Mr. Secretary.
The Chairman. If someone presented a $1 silver certificate or a
$10 silver certificate, you are not obligated to ^ve them coins for
that?
Secretary Fowler. No.
The Chairman. You can give them bullion, silver in a raw state?
Secretary Fowler. That is right.
The Chairman. Is that what they are doing now?
Secretary Fowler. That is the practice now.
The Chairman. Mr. Mize?
Mr. Mize. Thank you, Mr. Chairman.
Mr. Fowler, on Friday you told me that a melted-down present
50-cent piece was worth about 44 to 47 cents, is that correct?
Secretary Fowler. 46 cents, I believe.
Mr. Mize. That is close enough.
Secretary Fowlek. The silver content of the proposed new 50-cent
coin is worth 19.7 cents.
Mr. Mize. Well, now, with a guaranteed purchase price of silver
at $1.25 a troy ounce, what wUT be the melted down value of the
present silver dollar?
Secretary Fowler. The present silver dollar?
Mr. Mize. Yes. If the price of silver is at $1.25.
Secretary Fowler. It is slightly below a dollar.
Mr. Mize. Between 90 cents and a dollar?
Secretary Fowlek. That is right.
■dbyGOOgIC
76 COINAGE ACT OF 1965
Mr. MizE. And the 25-cent piece would be
Secretary Fowleb. I can give you the intrinsic value of the present
coins, 9.4 cents for the dime, 23.5 cents for the quarter, and 46.9
cents for the 50-cent piece,
Mr. MizE. Now, that is with the purchase price of silver at $1.29,
roughly?
Secretary Fowler. That is r^ht. Those figures are translated in
terms of $1.29 price.
Mr. MizB. I assume that the Treasury Department has a good
educational and public relations program lined up to explain to the
American pe tple what this is all about, using the National Advertising
Council, like you do onyour savings bond sale, and so forth.
Secretary Fowler. We have a very limit«d public affairs office,
Mr. Mize. We have kept it fairly well down. I think we are going
to have to depend for general understanding in this area on the businesa
and trade press, as well as the general press, the banking community
and other various organizations that nave a professional or institu-
tional interest in this problem. Whether it wul become necessary to
call on the Advertising Council, which has many, many requests, is
still a question. We are certainly conscious of the public relations
aspect of this. We have our own staff geared up to provide informal
tion as much as possible, considering otner demands upon it. But I
think the hearings of this committee, the hearings of the Senate
Banking and Currency Committee, the debates, the normal public
coverage of an item that is of interest and curiosity to most Ameri-
cans — this is what we are really depending upon.
Mr, Mize, Of course, the basic difference of opinion appears to be
whether or not we should continue having silver in the new 50-cent
pieces. The old cliche, "eventually, why not now," seems to be the
feehng of a lot of us.
Secretary Fowiek. I think the real question is whether the Con-
gress wants to go along with the President's recommendation.
Mr. Mize. Thank you, Mr, Chairman.
The Chairman. Mr. Hanna?
Mr. Kanna. Thank you, Mr. Chairman,
There is a great concern, as I have learned, from the users of copper
in my district. Copper has been advancing rather dramatically is
price. I think it has gone up about 50 percent in the last year.
The technical study you made says that the use of copper in coins is
only a tiny fraction of the total consumption of copper. Can you
give ua some idea about what the present use of copper in the coins
IS with the old coins, and what it will be with the new coins?
Secretary Fowleb. I will supply that for the record, sir. I think
the figures, when you actually nave them, wiU show it is a very, very
minor requirement in the total requirements picture, I should also
like to add for your information it is our expectancy and plan to use
the copper necessary for this purpose out of the excesses that are
present m our Government stockpile.
(The information referred to follows:)
■dbyGOOgIC
COINAas ACT OF 1966
Copper TequiremerUs based on fiactd year 196S prodttetio
Cplwre)
'S5~
Nbw»U07'
3,78^000,000
1, £73,000, 000
'Sffiffl
191,500.000
24,623,000
662.000
21,623,000
■ass
7,771,000
7,2S^S0O,0OO
3^673.000
62.920,000
D mpper, to cents— sUvar [olad Oi
Mr. Hanna. In other words, the United States will not be in the
copper market as a competitive buyer at this time?
Secretary Fowiek, That is correct.
Mr. Hanna. I think that is an important point to be made to the
{>ubhc, because I think there might be other indications being circu-
ated, and they may not have a favorable effect on the price of copper.
One other point I noticed. There was an indication in the Treas-
my's report that you would be using cupronickel cladding on your
€opper core in a strip form providea by private suppliers.
Secretary Fowler. Yes.
Mr, Hanna. Now, do you have strong assurance that a sufficient
amount of this type of stripping is available from private supphers?
Secretary Fowler. Yes;wedo. This has not been a casual inquiiy.
Both members of the Department, the Director of the Mint, her staff,
Secretary Wallace, and outside experts that are not interested in the
problem have inquired into this matter. I have had advice from all
of them, and they all assure me, that the sources of supply are ready,
willing, able and rehable, to meet our requirements in this area.
Mr. Hanna. All right.
I would think that— going back to our first point — that if we could
^o indicate where we would be in terms of copper, even in, let's
say on the quarter. If you could provide for the record how much
copper actually would be in the quarter, and how much that copper
would be worth in a quarter, assuming the highest price for copper.
I think the liighest pnce has been a little — about 54.1, it my figures
are correct. Assuuuug the highest
Secretary Fowleb. The himest price of record; yea.
Mr. Hanna. All right. Thank you, Mr. Chairman.
(The information requested follows;}
Coat of copper in quarters (based o
n 1,000 pieces)
Price per poand
Coat of copper
in 1,000 sUvBT
quftrlers,90O
Co^ of copper
Gl^quBiten
CtKf
0.196
.718
1-^
db,Google
78 COmAOE ACT OF 1965
The Chairman, Mr. Grabowski?
Mr. Grabowbki. Mr, Fowler, is either the Denver or Philadelphia
Mint capable of making the silver strips you are going to have in thi»
new silver-clad 50-cent piece?
Secretary Fowler. The mints are capable of making the strip,
but not the dad material.
Mr. Qbabowski. How many companies can make the required
silver strips now, and who would they be, do you know?
Secretary Fowler. There are at least four. There may be more,
but there are at least four.
Mr. Grabowski, Would you know who they might be at the
present time?
Secretary Fowler. I think that can be supphed to you.
Mr. Grabowski. Can you supply for the record who m^ht be able
to do it in the future?
Secretanf Fowler. Yes.
(The information referred to follows:)
Those that have ezpreseed an intereat in the making of silver clad strip for the-
mint include: Composite Metal Products, E. I. du Pont, Engelhard Industries,
Handy dc Harman, Olin-Mathieaon Co., Texas Instruments, Inc.
Mr. Grabowski. How long do you think it will be before the
mints can furnish enough silver strips that they will be needing?
Secretary Fowler. How long before the mints can furnish — ■ —
Mr. Grabowski. The silver strips that they will be needing in the
future.
Secretary Fowler. Well, I think the strip can be furnished now.
We cannot do the actual cladding process untU we get the new cladding
facilities and become once again a completely vertically integrated
operation from the basic raw materials,
Mr. Grabowski. You know, Mr. Fowler, I associate my remarks-
with Mr. Mize, that on all this legislation, a very weak point in my
mind is the advisability of having any silver at all in the 50-cent piece.
I know you have mentioned for the record that this is sometliing that-
causes you concern. But what if we just didn't have any silver in it
at all? Would this overall program just not be able to be brought
about?
Secretary Fowler. Oh, no. I think I should make it clear that
I know of no reason why as a physical or a technical matter the
processes by which you arrive at the new dime and the new quarter
could not be apphed to produce a similar 50-cent piece. The question,
however, is not a physical question, but a policy question of whether
or not Congress wants to make a complete break from silver or whether
it wants to take that decision as to retaining some silver in a coin as
a part of our coinage syst-em.
The Chairman. Mr. Widnall?
Mr. Widnall. Thank you, Mr. Chairman.
Mr. Fowler, do you have the information I requested at the last
hearing concerning minting of coins in Denver, the silver dollars?
Secretary Fowler. I don't know whether that is available here
this morning or not.
Miss Adams. We were waiting for a figure from Denver. They
have to estimate the actual. You wanted the number of pieces.
Mr. Widnall. Yes.
■dbyGOOgIC
COINAQK ACT OF IflflS 79
Miss Adah3. We have the wei^ts. But an estimate had to be
made, because, as you Imow, these were trial strikes. None of them
were delivered.
As a result they were not counted and b^ged. And so we have
to get from Denver — and it is 2 hours earUer out there otherwise we
would have this figure for you. But we will have it later.
Mr. WiDNALL. What is the date on those coins?
Miss Adams. 1964, Because under the law
Mr. WiDNALL. 1964?
Miss Adams. Under the law all coins can be dated 1964. The
trial strikes of silver dollars are all melted down now, as you know.
Mr. WiDNALL. But the other information is going to be supplied
for the record?
Miss Adahs. Yes; it is just a matter of the chanee in time, 2 hours
earUer, or we would have had the full information for you. I apolo-
gize.
(The information referred to may be found on p. 25.)
Mr. WiDNALL. Mr. Fowler, even though it will undoubtedly cost
more to manufacture the sandwich coins, there would be a terrific
savings in the cost of metals used as $1 .29 silver is replaced by 36-cen te-
a-pound copper. Would you supply for the record the seigniorage
profit for tM calendar year 1964 for each of the subsidiary silver coins;
namely, the dime, quarter, and the half dollar?
Secretary Fowlek. We are supplying seigniorage data with last
Friday's hearing, and I could also supply that right now, if you would
take it in terms of ^timated seigniorage at fiscal year 1965 production
rates.
Mr. WiDNALL. Would you supply that now?
Secretary Fowler. Fot the new 10-cent piece, the estimated
se^iorage at fiscal year 1965 production rates would amount to
$96 miUion.
Mr. WiDNALL. Ninety-six?
Secretary Fowlbe. Yes.
For the new 25-cent piece, $162.9 miUion. And for the new 50-cent
piece, S54.5 million. Total, S313.4 million.
Mr. WiDNALL. Well, now, in 1964 that would probably run higher,
because 1965 production rates are considerably lower, are they not?
Secretary Fowleh. No; they are higher.
Mr. WiDNALL. I am thinking now about putting out the new coins
at the same time as the old coins.
Secretary Fowler. Well, without trying to give you any approxi-
mate difference, the figures I have giveu you now represent a much
higher %\ire than the figures you wiU get for the 1964.
Mr. WiDNALL. Are you in a position to supply for the record the
estimated seigniorage that will take place, profit, through producing
the same number of these coins produced in 1964 by using the metallic
composition in the new bill?
Secretary Fowler. Yes; the computation we made was in terms
of fiscal 1965. When the matter was raised on Friday, the computa^
tion was made over the weekend, based on the fiscal year 1965 pro-
duction rates — since they are the liighest we have of record.
Mr. WiDNALL. Well, do you have that estimate now?
Secretary Fowler. That estimate b included in the figures I have
pven you. Oh, you want it for the old coins as well as lie new?
Digitized byGoOgle
80 COINAGB ACT OP 1965
Mr. WiDNALL. I want a comparison.
Secretary Fowler. Oh, yes, let me give you that for the old coins,
then.
Using the same fiscal year 1965 production rates — for the 10-cent
piece it is $6.6 million. For the 25-cent piece, it is $11.2 millioD.
For the 50-cent piece, $6.2 million.
A total of $24 million— as compared with the $313.4 million for the
new coins.
Mr. Hanna. Would the gentl»nan yield for just a minute?
I asked this question the other day.
Does that seigniorage indicate the amount of profit that is made on
the coin after the total costs, including the materials and the labor?
Secretary Fowler. No, that is just the difference in the material
costs. The production costs differentials are not figured into that
computation.
Mr. Hanna. But I think it is important that the committee realize
that those figures do not include the cost of running the mint, which
is the labor and the investment and amortization of the equipment.
Secretary Fowlbh. That is correct. Nor do they mc^ude the
additional cost in the cladding process that would be involved.
Mr. Hanna. Thank you.
Secretary Fowlbb. I beg your pardon. That does include the
cost of the cladding process, which is included as a part of the cost of
the material on whicn these figures are computed.
Mr. WiDNALL. Mr. Fowler, I think you have indicated in your
previous testimony that your estimated production rate for 1966 and
1967 will be even higher than for 1965.
Secretary Fowlbb. That is correct.
Mr. WiDNALL. So that it can be anticipated that there would be
an even greater seigniorage profit.
Secretary Fowler. That is correct.
Mr. WiDNALL. That is all.
The Chairman. Mr. Gettys?
Mr. Gettys. Mr. Chairman — Mr. Secretary, do I understand your
position is that the hoarding of silver-content coins will be minimized
by the retention of some silver in the 50-cent coins?
Secretary Fowler. Yes. Secretary Wallace outlined three dif-
ferent types of hoaf'ding, and this will counter one of them, the
grandfather type
Mr. Gettys. But it is your position that if experience proves that
hoarding is very prevalent, that the Joint Commission would have
the duty and authority to recommend corrective measures?
Secretary Fowler. That is correct.
Mr. Gettys. Could the Joint Commission's recommendations be
effective — ^be made effective expeditiously enough to correct the
problems or woidd we have to go through the whole legislative process
Secretary Fowlbb. Well, I think — you are speaking now in terms
of the new 50-cent piece?
Mr. Getttb. Yes — or any of the defects that may possibly come
to l^ht with experience.
Secretary Fowlbb. I would think that the problem of making an
adjustment in the program once it is well underway, such as going
from the 40-percent-fineness silver half doUar to a half dollar made
Digitized byGoOglC
COINAQB ACT OF 1865 81
out of the same material as the quarter would be minimal. We would
have a great deal of flexibility in making changes of that sort once the
program was well underway and the production processes were all
behind us, and the new type of coin was out and in full circulation.
We would be dealing with one aspect of a problem rather than with
the total problem. You will have together in this commission,
representatives of both the executive and the l^slative, and you will
have a well ordered way of arriving at any decision that should b©
taken.
This question of later adjustment of the program is one of the
reasons, I think, for not really refusing to fight the bull on these issues ;
but simply that you can take the decisions better in the light of experi-
ence, and execute them more effectively with the benefit of this
Commission.
Mr. Gbttys. Thank you, sir.
The Chairman. Mr. Cabell?
Mr. Cabell. Thank you, Mr. Chairman.
Mr. Secretary, during the course of this hearing, I have heard
several questions raised as to what would be the reaction if we dnln't
get public acceptance of this new coinage. Now, can you conceive
of any possible situation of how they could refuse to accept it?
Secretary Fowler. I really cannot. I think there would be a
certain amount of passing comment. But except for some possible
isolated funmaking
Mr. Cabell. Four of these new quarters will buy exactly what a $1
certificate will. It is l^al tender. It operates in vending machines.
So what? How could there possibly be any possible dislocation
because of a temporary- — -
Secretary Fowler. I don't think it becomes a dislocation. I think
it would come to, well, comments and criticisms of this or that. But
this is the way the world works.
Mr. Cabell. I would like to close with one suggestion, if I mav —
that if these people heard those new 21-cent half dollars which tney
say they will, and which I hope they do, and you have a sufficient
productive capacity, maybe we could, pay ofiF the national debt that
way.
Secretary Fowler. Well, it is a promising outlook.
Mr. Cabell. Thank you.
Mrs. Sullivan (presiding). Mr. McGrath?
Mr. McGrath. Thank you, I have no questions.
Mrs. Sullivan. Mr. Hansen?
Mr. Hansen. Secretary Fowler, is it correct there are approximately
12 billion coins in existence?
Secretaiy Fowler, Yea, sir — at least if we assume a 25-year life of
the subsidiary coins of the type under consideration before th&
committee.
Mr. Hansen, You mean up to and including the 50-cent piece, or
the silver dollar as well?
Secretary Fowler. Yes, sir. The 12 billion figure does not include
the silver dollar.
Mr. Hansen. Of course the number of those doesn't amount to a
great deal.
I share the concern of Congressman Gonzalez, which he indicated
a bit f^ when he made reference to the existii^ coins in his question.
Digitized byGoOgle
s
82 COINAGE ACT OF 1965
Now, if it is true that we have 12 billion coins, and there are 170
million people in the United States, less than a htmdred coins per
person would more than soak those up.
Secretary Fowler. Right.
Mr. Hansen. I think we are being a little naive in our approach
to this proposition. I have no concern at all — and I am not really
an expert on this busmess of what the numismatist thinks or does —
but if you can rev up your production on the new coins, as you say
you can, then I would just let them go ahead and hoard them, because
?ou are going to make a big profit on them. And you can continue to
:eed them to them.
But the thing that I am concerned about, and rather deeply, is the
eflFect that this whole move will have on tne existing coinage. The
numismatists whom I know say "you can't lose, all you have to do is
go buy it — it has an intrinsic value." More than that, with the way
these people are soaking up the supply, the 25 years that you estimate
as its life, you know, on a continumg basis, is going to shrink down to
just a few years, in my judgment. I think that this piece of legislation
ought to have in it some provision, not for immediate withdrawal of
the existing silver coinage, but eventual withdrawal of it, and to
handle it in a way that these people could not gain anything by step-
ping out and buymg the existing supply and stashing it away.
I know of instances where people might now have as much as a
ton and a half of it in bonded warehouses, on certificates — not too
many, but a few.
Secretary Fowlbr. We have certainly scratched our brains on
some method of preventing this by law. And we have not been able
to come up with anything that has sufficient merit — that we felt
would commend it to the Congress, or that would not be outweighed
by the efforts along this line of the people in the coin business who
may try to get 180 miUion Americans so excited, that they are going
to go out and buy coins.
Mr, Gettys. Mr. Chairman, would the gentleman yield?
Mr. Hansbn. Yes.
Mr. Gettts. Mr, Hansen — Mr. Secretary, isn't the real intent of
this program that you have suggested to reduce coins as things of
intrinsic value, and to make them useful solely as a medium of ex-
change? Isn't that the purpose?
Secretary Fowler. That is the purpose. The sooner we do that,
I think, the less opportunity there is to excite the general pubfic, and
in effect doing the job that the coin is supposed to do.
Mr. Gettys. Thank you.
Mr. Hansen. Mr. Secretary, the thing that concerns me is that
I don't want to leave here, in my later days, with it on my conscience
that I was a party to an arrangement that made it possible for a
group of smart speculators to maie a fistful of money unduly on this
proposition. 1 think there is a danger that this can happen in this
matter. In fact, a ve^ real danger.
Secretary Fowleh, I share your view. And I share the same con-
cern. The issue is how is the best way to prevent it. And you would,
I think, Sliest that it best be prevented by a harsh law that gets
everybody aU excited and sthred up and gets us back to >ther periods
of law enforcement, that have been fairly few. I am suggestir^ that
we get through this period of the next 5 years, of the adjustment to
Digitized byGoOgle
COINAQB ACT OF 1966 83
this pn^am, by deferring this decision about the ultimate withdrawal
of the existing coinage until it can be made away from any impaet on
this new pr<^atn.
There are calculated risks, Mr. Hansrai, in this business, every way
we turn. And I think it is a question for the judgment of the Congress
as to what is the course of conduct that is leaat apt to encourage this
tendency to hoard.
Mr. Hansen. Well, Mr. Secretary, I would like to see you folks
tliat have had this sort of thing on your hands before, who have studied
this proposition, make some sort of analysis.
Secretaiy Fowler. We have made an analysis, and you have the
benefit of it right here.
Mr. Hansen. Well, thank you very much. But I still am con-
cerned about the problem. I wish tnere were acme way we could
figure out to elimmate this possibility, which I think is very real.
Secretary Fowler, I do, too. This has certainly been a problem
that we sweated blood oyer, and we have not in any sense had a
cavalier attitude about the possibility that you mention. Sometimes
there are these questions of whether you choose one path or the other,
and there are various ways of getting along. ,
Mr. Wallace. Mr. dhairman, it should be noted, first of all,
that it is to the advantage of coin dealers to stir up the fears of such
a shortage in order to get more people to use their services. But it
should also be noted that under section 5 of the bill, there is standby
authority to prohibit the melting and export of coins, so that if anyone
hoards coins for the sake of their intrinsic value in hopes of ultimately
melting them down and making a profit, they stand to lose a good deu
of money in terms of what they could be earning on their investment
in a bank deposit or a savings and loan account or a blue chip stock.
This is true because if the hoarding of silver coins were to become a
problem, the Secretary of the Treasuiy would have the authority to
prohibit the melting of these coins. Thus it would be rather futile
for anyone to hoard the existing coins in the hopes that they could
melt them down and make a profit thereby.
I should also like to point out that in terms of general hoarding,
12 billion coins amounts to $2.3 billion, and that is a great deal of
money for people to take off the market and freeze, so to speak.
The Chairman. We have this situation. Wo would like to have a
30-minut6 executive session. We have some requests for questioning.
Mrs. Sullivan, you didn't finish, I know. Mr. Widuall has a
question, and Mr. Fino. If we can finish pretty soon, we could have
an executive session and not have to come back.
Mrs. Sullivan, This is very brief, Mr. Chairman, to Miss Adams.
Miss Adams, I wish you would clear up the confusion, in my mind
at least, of how much silver we are using in coinage- The President
has said 300 million ounces a year. The Secretary said 203 million
ounces in fiscal 1964, and 268 million in fiscal 1965, the present year.
You testified before the House Appropriations Committee we were
using 215 million ounces this year, and wUl use 252 million ounces
in the coming year,
Are the three of you using different 12 month periods — fiscal and
calendar?
Secretary Fowler, Well, the figure I used to give you that one
%ure is the one in the table in my statement of 203 million ounces —
that was for calendar year 1964.
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84 COINAGE ACT OF 196-5
Mrs. Sullivan. For the record, I just felt if you could clear tlii3
up, to show exactly how these three different figures were obtained
on actual usage and how it can be explained — I know that you keep
track of every ounce and every scrap of silver in the mint, and silver
dust, so there is no question about the availability of exact figures.
(The information referred to follows:)
Clarification of Fiaumsa Used for Silver Conbtim&d in Coinage
Figure used by the President: 300 million ounces — This is the annual rate of
consumption of silver in coinage at our current rate of coin production.
Figures used by Secretary Fowler:
203 million ounces — This is actual silver consumed in coinage during
calendar year 1964.
268 million ounces — This is a current estimate of silver to be used during
fiscal year 1965. It is based on actual silver consumed in coinage for 11
months, July 1964 through May 1965, plus an estimate for June 1965.
Figures used by Miss Adams before House Appropriations Committee:
215 million ounces — These ounces represent the amount of silver recjuired
for the production of the subaidiarj coins in our fiscal year 1965 budget
estimate. However, this production was not sufficient and had to be In-
creased.
252 million ounces — These ounces represent the amount of silver required
for the production of the subcridiary coins in our fiscal year 1966 budget
request.
Mrs. Sullivan, Miss Adams, I want to express my personal con-
gratulations to you for the fine job that you have done as Director
of the Mint in expanding mint production to meet this shortage. I
don't know of any business executive in this country, or production
executive, who could run (dl of the plant facilities 24 hours a day, 7
days a week at full capacity, and get away with it as long as you have.
1 think you are to be congratulated.
Miss Adams. Thank you.
Secretary Fowler. I would also like to thank Mrs, Sullivan for
that comment, and to underscore it by saying that if there were E-
awards and whatnot, one would certainly be merited here.
The Chairman. Mr. Widnall?
Mr. Widnall. Mr. Secretary, who determines how many coins
shall be coined each year?
Secretary Fowler. I suppose ultimately it is the Secretary of the
Treasury on the advice ana recommendation of the Director of the
Mint. I look to Assistant Secretary Wallace, working with the
Director of the Mint, to devise those production schedules and runs.
And so far as I know, in terms of my current experience, over the last
2 months, these are not haid-and-iast decisions that are made with
any great fanfare. We really delegate that responsibility primarily
to the Director under the general supervision of Mr. Wallace-
Mr. Widnall. Miss Adams?
Miss Adams. Mr. Widnall, may I say that this area is one which has
occupied a great deal of our time and attention, because the Mint and
the Treasury is just as anxious as you are and as Mr. Fascell's com-
mittee was m being sure that the mint makes exactly the amount of
coin which is necessary to supply the commerce of the country. We
are utihzing every possible device, every avenue of information, and
everything that we can in cooperation with the banking industry to
find out how many coins will be needed and, upon that, we baae tho
Amount of coins we make.
■dbyGOOgIC
COINAQE ACT OF 1965 85
There was a time, as you well know, when our facilities were not
quite geared up to do even what we would hare liked to have done.
Congress was generous in giving us sufficient money to go on the crash
program and, with that fine cooperation, we were able to do what we
Mr. WiDNALL. Do you presently have the estimated number of
coins in each categoiy for 1966 and 1967?
Miss Adams. We have a general estimate, sir, but we could not
finalize that because, as you know, we are only — we only do what the
law permits us to do. Bjiowing that this legislation would be coming
out, we have not actually made out our production program that far
ahead, although wo have, of course, budgetwise, estimated what we
would probably need if — when you change the coinage alloy, we
undoubtedly will have to go up for a supplemental appropriation,
because we will increase our production.
Mr. WinwALL. Do you have those figures available?
Miss Adaus. We can supply those figures to you for 1966 — the
r^ular production figures which we estimated prior to the l^islatiou.
(The mformation requested follows:)
The following is the estimated production contained in our budget request for
fiscal year 1966:
EilimaUd production
[In billions ol plecca)
I cent ,,, 6,510
Scents _ - 1. 116
10 cents - - - - .930
25 cents- , -,. .465
50 cents - - .279
Total — 9.300
Mr. WiDNALL. Mr. Secretary, one more question: Could any vast
increase in the production of coins have a very material economic
impact?
Secretary Fowlbr. Will the increase
Mr. WiDNALL. Could an increase have?
Secretary Fowleb. I do not see any material impact. You are
speaking in terms of the amounts of labor employed, the amoimts
of new materials that a^e used, the amounts of, macninery and .equip-
ment — I tlunk it wotild be a minor program in those general terms —
nothing compared with the large major production programs of
many of our individual companies today or many of the iodividual
programs in the Defense Department.
Mr. WiDNALL. You don't think that the material increase in
production of coins would affect the general economy?
Secretary Fowler. Well, I will put it the other way. The absence
of an adequate supply could have a very disruptive effect. But I
think assuring an adequate supply would not nave any additional
effect. It is just preventing an unfortunate thing from happening.
Mr. WiDNALL, That is all, Mr. Chairman.
The Chaibhan. We have additional members who have brief
questions.
But it would be all r^ht with you, Mr. Fowler, and Miss Adams,
for any member desiring to do so to submit a question in writing,
and you will answer it?
Secretary Fowler, Yes.
■dbyGOOgIC
86 COINAQE ACT OF 1965
The Chairbian. Mr. Fino?
Mr. FiNO. Mr. Secretary, both the new nickel and the new dime,
being of the same metallic composition
Secretary Fowler. There is no new nickel, sir. You mean the
existingnickel?
Mr. FiNo. Yes; that is right. So that the nickel and t^e new dime,
being of the same metallic composition will undoubtedly present ua
with a situation where the intrinsic value of the 5-cent piece will
actually exceed the intrinsic value of the new dime. Does this bother
you insofar as public acceptance of the change is ctmcemed?
Secretary Fowler. No, sir; it does not. I believe as Icm^ as Ute
general purchasme power of the dime and the nickel retam t^eir
current relative relationships, which they would under the new law,
this does not present a problem. Actually, however, it costs more to
produce a dime because of the cladding process.
Mr. Fiso. Miss Adams, just one question.
How far has the mint gone in preparation for the mintii^ o( these
new coins?
Miss Aqams. The mint has incurred no actual experience or any-
thing of that kind, naturall;^ because under the law we are to make
coins of the existing alloy. The mint has, I hope, intelligently sou^fc
to estimate what our financial problems would be, how much tilings
would cost, and all of that sort of thing, and those figures we can give
you if that is what you mean.
Mr. FiNO. Well, assuming that the Congress passes this bill within
the next few days, how long will it take you to get these new emns in
production?
Miss Adams. We can go into production actually as socm as the
material is available from private mdustry, and we have made surveys
of this, and found that rather shortly we can get some supply of the
new material which, if you approve the recommended l^;islation, we
would be using. However, the mint has not gone beyond finding
out what the situation is. In other words, if you are askmg if we have
made any contractual obligations, we have not.
Mr. FiNO. We have gotten the Secretary's opinion on the frac-
tional currency. What is your opinion on fractional currency, in
order to relieve this shortage of coins?
Miss Adams. Sir, it rather concerns me a bit, from the feeling thafr
the coinage of the country should be one which is efficient, which is
economical to produce. If we make fractional currency — as you
know, the fife of a httle piece of paper, at least in my pocbetboofc
would be rather short. I rather think you would have a tremendous
manufacturing problem. It doesn't cost much to manufacture this
little piece of paper, but you would have to manufacture many more
even than coins. Then as you yourself said, to make this material
usable in the vast automated machinery, the merchandising setup
which has all over this country, and on which so many taxpayers
depend, someone will have then, also, in addition to manufacture the
piece of metal, because I rather doubt that even the most skilled of
the automated vending machines could be transferred to use pieces
of paper.
So you would have not only to make the fractional currency, but
someone would have to provide for the metallic pieces which would
work these vending machines, on which all of you depend, as well as
all the other 192 million people in the country.
Digitized byGoOgle
COINAOE' ACT OF 1965 87
Mr. Fiifo. Most of the coin machines require dimes. The bill I
introduced in January of this year provides for the issuance of scrip
paper in denominations of 25 and 50 cents, to help alleviate this
«hortage.
Just one question of the Secretary of the Treasury: In view of the
present situation, and the great concern of the public, wouldn't it be
a good idea if we had on these new coins "In God We Trust"?
SeCTetary Fowlek, Oh, yea; by all means.
Mr, FiNO. Thank you.
TTie Chairman. Mr. Gonzalez?
Mr. Gonzalez. Mr. Secretary, would you favor the revival of the
transaction tax and the end use certificate law?
Secretary Fowleb, I, myself, have not studied that to the degree I
could give you my own answer. I would prefer to have Secretary
Wallace deal with this question.
Mr. Wallace. Mr. Gonzalez, this question of the end use certifi-
cates woxild mean that you would have to certify, before you could
get silver from the stockpile, as to what the use would be. Therefore,
you would wind up with a problem of a two-price system ; that is,
silver which is available for use specifically in industry, and sort of a
free floating supply of silver which would be available to speculators
and for the world market.
It was this problem of having a two-price system and its pressures
in terms of gray markets and so forth which caused us to decide against
that.
Moreover, with the program which we have — namely to eliminate
the silver in the dime and the quarter, and continue it in only very
modest amounts in the half dollar — there should be sufficient silver
for all purposes, and there should be no reason for any speculation in
silver.
Mr. Gonzalez. But you have no present way of really knowing the
ultimate use of your present sales or redemptions. So I just wonder
if it would not be wise to revive these practices that worked effectively
during the period they were in force for precisely the same reason that
we fear now might happen, that we want to avoid.
I was Just wondering if it would not be wise to have concomitant
legislation of this type as we go into this new system.
I just wondered what the thinking was among the Treasmry officials.
Tne Chairman. You may elaborate on that, Mr. Wallace, when
you examine your transcript, and give a full answer,
Mr. Wallace. Thank you, Mr, Chairman.
(The following information was subsequently submitted for in-
clusion at this point in the record:)
We believe that the basic problem is to maintain the existing silver coins in
circulation, particularly during the period needed to manufacture the new coins
in adequate quantities, and the basic answer to this problem is maintenance of
the $1.29 plus per ounce for silver with indications that the Government is pre-
pared to do this indefinitely. Lirnitations on the use of silver such as the licensing
of the sale thereof to industrial users, and inauguration of an end-use certificate
system, may tend to create a two-price system for silver, with all of its attendant
difficulties, as indicated above. Moreover, institution of these and other controls
which have been suggested would, we believe, tend to create a psychological re-
aotion which would be counterproductive. In other words, excess indications of
a worry about scarcity could tend to create the scarcity. The fact is that we are
convinced that silver supplies are adequate for the program.
■dbyGOOgIC
88 COINAGE ACT OF 1965
The standby authority id the bill to prohibit the melttsg and exporting of
coins.will also deter the hoarding of them Decause the potential hoarders will not
be able to count on their ability to realize on their investments in coins if there is
a possibility that they cannot be melted or exported. If we were planning to
take the exist ing- coins out of circulation right away, then it might make sense to
have an antihoarding provision as a complementary measure as was .the case in
1933 when gold coins were recalled from circulation. However, our present pur-
pose is just the opposite ; namely, to keep as many of the existing coins in circula-
tion as possible.
A prohibition on ihe export of silver bullion may also tend to create a two-price
system and additional difficulties. However, it shoidd be pointed out that thero
is already authority on the statute books in the Export Control Act for the insti-
tution of controls over the export of ailvw bullion if such controls should prove
to he-ni
The CKAiaMAN. Now, our schedule is prepared. We expect to
have this executive session.
Tomorrow morning we will meet at 9;15, We will hear all outside
witnesses tomorrow morning.
We e^ect to have an executive session for the purpose of votmg
on the bid some time after 11 o'clock tomorrow.
With that understanding, we will have an executive session now.
We will ask those who are not eligible to be in the room to give u»
the use of the room as soon as you can conveniently, so we can have
this executive session.
(Whereupon, at II :40 a,m,, the committee adjourned, to reconvene
at 9:15 a.m., Tuesday, June 8, 1965.)
■dbyGOOgIC
COINAGE ACT OF 1965
tuxbdat, june 8, 1965
House of Repbesentatives,
COMMITTBB ON BaNEINO AND CuRBENCT,
Washington, D.C.
The committee met, pursuant to recess, at 9:15 a.m., in room 2128>
Raybum House Office Building, Hon, Wright Patman (chairmaa)
presiding.
Present: Representatives Patman, Multer, Barrett, Mrs, Sullivan,
Reuss, Moorhead, Stephens, St Germain, Gronzalez, Minish, Weltner,
Hanna, Grabowski, White, Gettys, Todd, Cabell, McGrath, Hansen,
Annunzio, Widnall, Fino, Haipem, Brock, Johnson, Stanton, and
Mize.
The Chaibman. The committee will please come to order.
I will present for the record a letter from Prof, Lester V, Chandler,
professor of economics, at this point.
(The letter referred to follows :)
Princeton Univbebitt,
Depabtment 07 EcoNowics,
Princeton, N.J., June 4, 1966.
Hon. Wbiqht Patman,
'Chairman, Banking and (
U.S. House of Repreeenta
Deab Mr. Patuan: Please permit me to comment on President Johnson's
proposal for replacement of our present fractional silver coins. Such a replace-
ment is eseential if we are to escape the iaconveaience of a serious shortage of
coins ia these denominations. The President's proposal concerning quarters and
dimes ia practical and economical and I urge its adoption. He quite properly
"For many decades now the value of a particular coin has depended not on the
value of the metal in it, but on the face of the coin. Today's coinage must bo
primarily utilitarian. The new coinage will meet this requirement fully, while
dispensing with the idea that it contain precious metal."
Accepting this principle, which is completely valid, there is no justification for
retaining any silver in the half dollar. Half dollars made of the same metals as
the proposed new dimes and quarters would be utilitarian, economical, and com-
pletely acceptable. To retain silver in this coin would add nothingto its usefulness
as money and would be expensive for both the country and the Federal Govern-
ment. I am informed that there are how in circulation approximately 1,664 million
half dollars. Since the gross weight of each half dollar is 0.4019 ounce, the total
weight of the half dollars now in circulation is approximately 628,571,600 ounces.
To replace these with coins having a 40-peroont silver content would thus require
251,428,640 ounces of pure silver, which at $1.2929 an ounce would be worth
$325,072,088. Thus merely to replace the existing half dollars, leaving aside the
amounts of silver that would be required for future coinage, would look up
251,428,640 ounces of the precious metal that would be highly useful for other
Surposes. And it would add nothing to the efficiency of our monetary system,
loreover, it would be highly and unnecessarily expensive to the Treasury. Ab
already not«d, it would require silver with a value of $325,072,088, If this silver
were not included in coins the Treasury could sell it. It would be far cheaper for
the Treasury to make half dollars of the same copper and copper-'nickel alloy to
Digitized byGoOgle
90 COINAGE ACT OF 1065
more than $280 million. Even in these days of huge Federal budgets this amount
is not insignificact.
Perhaps the proposal to retain silver in the half doUar reflected a desire to
protect silver prices and American silver mining. But surely both the prospective
demand-supply rdationships for silver and the proposal to purchase domestically
mined silver at not less than Sl-25 sn-onnce make this unnecessary.
In summary, I urge prompt enactment of the proposals for dimes and quarters
and application of the same principle to half dollars.
Respectfully submitted.
Lester V. Chandler,
Professor of Economics, Princeton UniversUy.
The Chairman. We have two separate groups of witnesses this
morning, and we would like to hear from each one individually, and
then we will interrf^ate the witnesses together as agreed upon.
Mr. Hardy, will you come around, sir, and Mr. Strauss, of the
American Mining Congress.
Mr. John Stevens, executive vice preadent of the International
Silver Co., and Mr, Wemple, and you other gentlemen from the Silver
Users Association will then be heard before the committee questions
any of the witnesses.
We will first hear from Mr. Hardy and Mr- Strauss.
Representative Conte is here. Mr. Conte has 5 minutes, and he
has a statement to bring out the main points. I think we will hear
from you first, sir. You may ttike your seat there. Then we will
hear from you gentlemen next.
You may identify yourself, sir, and proceed.
STATEMENT OP HON. SILVIO 0. CONTE, A KEPEESENTATIVE IN
C0N6XESS FROH THE STATE OF HASSACHVSETTS
Mr. Conte. Mr. Chairman, members of the committee, I welcome
the opportunity you have afforded me this morning to present my
views on the proposals now before this committee for a new coinage
system.
I do not believe that the President's proposals are characterized by
the breadth of vision or commitment to the total problem which
must be the absolute requisites of today's legislation if we are not to
find ourselves confronted with another coinage decision in the very
□ear future.
As Members of this Congress, we are confronted with the responsi-
bility of making the most fundamental change in om- coinage system
since its inception in 1792. That responsibility will only be met by
l^slation that is as farsighted as that of our distinguished predeces-
sors. I do not beUeve legislation that includes the retention of silver,
in any quantity, in the half dollar will meet this challenge.
I have placed before you a complete statement, together with a
proposed amendment, containing my views with respect to the pro-
posed new half dollar. In the interests of time and expediency, I
will only briefly summarize it tor you.
There are two facets of the coin and silver dUemmas that call for
an across-the-board elimination of silver from our subsidiary coins.
■dbyGOOgIC
COOJAOB ACT OP 1968 91
First, we are in the midst of a critical silver sui^ly and demand
situation. We have reached the point where the annual industrial
use of silver, exclusive of coin^e, is in excess <^ the total annual free
world production of silver. The continued use of any silver in the
subsidiary coins will only aggravate the silver situation^
The position that silver coinage ia a luxury this country ean no
longer afford is not merely a prosuver user nor an antisilver producer
argument. The excellent and comprehensive "Treasury Staff Study
of Silver and Coinage" indicates that:
There would be an appreciable gap between silver consmnptJon
and production even if tnere were no demand for silver for coinage;
Existing market demand for sUver would not be affected since the
U.S. coinage requirements have been met from Treasury's stock of
Eolver and not from silver boi^ht each year on the world market;
and
The existing silver supply held by the Treasury ia likely to be no
more than adequate for the short-run stabilization of world silver
prices essential to the interests of this country in making the tfansi-
tioD to a new coinage system.
Secondly, the purpose of new coinage l^^slation must be to estab-
lish and maintain a coinage system fulfilling its primary function, that
"of a circulating medium of exchange. I am convinced that so long
as we are mintmg a silver content coin, we will be minting a coin that
will not be circulated. This would be especially true if we were
minting only one silver content coin.
The present 50-cent piece is the coin that is in shortest supply at
this very moment. It has been accorded new stature in these pro-
posals, which, unfortunately, may well spell its demise as one of our
circulating coins. It has been tagged with the ignominious title of a
"presti^" coin, a coin that will retain a link with the traditions of the
past. But, at the same time, I am sure it has been relegated to the
fate of the silver dollar.
To those who would argue that we must have a prestige coin, I
would reply that it will be a sorry dav for this country when its pres-
tige will be equated to a pinch of suver in one of our coins. How
prestigious is that coin at any rate, when we have before us a proposal
that would cut the measure of that prestige more than in half. We
need not a half dollar in the tradition of U.S. silver content coins nor
in the tradition of European tokens of a country's prestige. We need
a half dollar as a medium of exchange.
Mr. Chairman, the concern of this committee should not be diverted
to symbohc prestige coins. The prestige of our present silver content
coins is responsible for all of us being here today. We cannot continue
to supply the unrealistic demands tnat are being made for these coins.
The only answer to this situation is a viable subsidiary coinage system
where every coin, the half dollar, as well as the dime and quarter, is
circulated as a utilitarian instrument of conunerce.
Let's take the coins out of the pockets of the speculators and put
them into the pockets of the spenders.
Thank you, Mr. Chairman.
The Chairman. Thank you, Congressman. We appreciate it.
(The prepared statement of Mr. Conte follows:)
48-938 — 85 7
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COINAGE ACT OP 1065
I have given long and careful conaideration to the desirability and inevitability
of a change in our coinage system. My interest in the problems facing our
coinage system waa not initiated last Thursday when the President's message
was presented to CJongress. I have worked for many years with the Treasury
Department, as a member of the Treasury-Post Office Subcommittee of the Ap-
propriations Committee, to maintain a workable coinage system in the face of
seemingly unrealistic demands for our present silver content coins. On April 5
of this year, on the floor of the House, I called for a system of subsidiary coins
which contained no silver. Today, you, the members of the Banking and Cur-
rency Committee, are taking the first step which will lead to the needed changes
in the coinage system aa we know it today. I urge you to give ^our thoughtful
consideration to a system of subsidiary coins thai does not contain silver.
The coin and silver dilemmas are inextricably interwined. A decision affecting
one must, of necessity, bear heavily on the other. A piecemeal approach, re-
solving today, for example, the coin needs of the Nation and leaving the silver
situation for another day can only serve to weaken the proposed solution and
compound the problem still existent.
The weakness in the proposals now before this committee is the retention of
silver, in reduced quantity, in the half dollar. The President's message and the
testimony which has been received from the officials of the Treaaury Deportment,
while exhibiting an impressive grasp of an enormously complex situation and a
lucid presentation of the position they espouse, are undermined by the tailura
to propose an aerosa-the-board elimination of silver from the subsidiary coins.
I believe the first question which must be answered, of the many with which the
committee is now faced, is: Can we afford 15 million ounces of silver a year t&
maintain a link with silver through the 50-cent piece?
My answer is that we cannot aSord to maintain this link nor is it necessary for
us to do ao. And, I believe that an arrival at that answer has not been through a
piecemeal approach, but only after careful consideration of the coin needs and the
silver needs of all.
We arc facing a difficult transition period ahead if any change ia made in the
coinage system. But that transition will only be ntade more difficult by the
proposed new half dollar. We must ask the public acceptance of silverhss dimra
and quarters having substantially no intrinsic value while retaining silver and
intrinsic value, not juat in a coin, but in one of the new coina which is part of the
proposed legislation.
You know, and I know, that there must be a change in our coinage syat«m and
the time for that change is now. We know that the measure of a coin a worth is
not tied up in the metal content of that coin, but in the goods and services that
can be bought with that coin by ita holder. Hut, we are leaving ourselves wide
Open for attack with the proposed 50-cent piece. We know, but are we convinced
when we continue in the same legislative package a sQver-content coin having
intrinsic value?
It certainly does not appear that we arc convinced and I don't believe that the
milliona of coin users are going to be confident that we have given tbem a viable
new coin system, effective in all of its aspects to meet the needs of the country
as a medium of exchange.
"The members of this committee are wrestling with the difficult problems posed
by the need for a new coinage system. That need arises from two basic reimona:
The decreasing supply of silver at a time when industrial, art, and defense uses of
that metal are increasing, and the needs of this country for a coin that will stay
in circutntion. The proposed half dollar contradicts both of these premises.
We have reached the point where the world uses of silver, exclusive of any
that Is used in coins, exceed the total annual free world production of that m<-ttu.
This gap, has, to some extent, been Piled by the redemption of silver certificates
by the industrial users, tapping the Treasury's stock of silver, now approximately
1 billion ounces, aa a supply source. In 1964, for example, 141.4 million ounces
of that silver atosk were withdrawn to meet the legal requirement to redeem these
outstanding certificates. The average monthly certificate redemption for ItlfiS
has been 10 million ounces and at the end of March of this year there were the
equivalent of 763.9 million ounces of silver bullion remaining in circulation in
the form of these certificates. The Treasury stalT study said it Is not necessary
to Immobilize the existing Treasury stock of silver in readiness to meet possible
redemption demands, but It is a significant factor, and one required by law, that
must be taken into consideration. I would counsel that we should attempt to
Digitized byGoOglC
COINAGE ACT OF 1965 93
Iteep the Government's accounts in as proper an order as we would our own.
The slightest chance that the silver supply might fall below the amount necessary
to redeem the outstanding certificates would give impetus to increased redeeming
activity.
Pursuing further the silver Bituation, it will be necessary to continue minting
the present silver- content coins until we ha^e built up a sufficient quantity of
the new coins that they can be safely pLaL;ed in circulation, and circulate. During
that period, at the earliest it will continue until early or mid-ld66, based on the
average monthly use of silver for coinage thus far this year, we will be consuming
26.3 million ounces of silver per month, .^t the most favorable estimate, we wiC
continue this use for about a year and consume more than 300 million ounces of
silver from our present stock. In addition, the Office of Emergency Planning has
proposed a silver stockpile for national defense needs. The estimated amount
of silver for that purpose is 165 million ounces.
I don't see, in the midst of tb^ae figures a spare 15 million ounces for a sin^
year's production of half dollars. Nor do I envision a year's productioa of h^
dollars that would require only 16 million ounces of silver. The 50-cent piece is
the subsidiary coin that is in shortest supply in this country today. In 1964, we
minted 206 million 60-cent pieces and did not meet the demand for that coin.
At the proposed 40-percent silver content, that would have used up approximately
30 million ounces of silver, almost exactly equivalent to a year's production of that
metal in the United States. And, as you know, there must be a backlog of these
coins before the first can be put into circulation and that backlog must serve double
duty if it is to go into circulation as the coin that is presently in shortest demand.
So, it isn't just 16 million ounces of silver a year that we must worry about. It
is the amount of silver that will be uaed to bring the inventory of the half dollar
up to thepoint where it will, in fact, circulate when placed in the hands of the
public. That amount of silver must be taken from a stock that is also called
upon to meet the demands of certificate redemption, continued transitional mint-
ing of the present silver-content coins, and defense stockpile needs. It just isn't
And the same could be prophesied for the proposed new silver-content half
dollar once it ia placed in circulation. It just won't be there. It will be an
exception to an otherwise functional coinage system and, whOe the eminent
danger of its being hoarded for spesulation in its silver content has been some-
what alleviated by reducing that content, it will be the only coin placed in circu-
lation by the Treasury to contain silver.
I am convinced that it will disappear from circulation as quickly as it is placed
into con»mercial channels. With that disappearance will come increased demands
for the coins from banks and commercial users across the country and a spiraling
coi^umption of silver. We have had increasing trouble keeping an entire pro-
gram of silver-content coins in circulation and those problems will not disappear
when the h^f dollar is retained with any silver content. We have managed to
bring the supply of pennies and nickels into a reasonable line with the demands
for those coins. I know that everyone here today believes that the new silverlcSB
dime and quarter can resolve the supply and demand conflicts for those coins.
By minting a 50-cent piece of comparable metal content, we would once again
have a coinage system equal to the demands that will be placed upon it.
I do not believe that we should back ourselves into a corner with the half dollar.
We should not legislate a coinage program that will be two-thirds successful and
find that it would be folly to place in circulation a silver-content half dollar late
in 19G6 and then have to retrace a portion of the difficult road that we are now
traveling.
There are, in addition to the silver use and circulation problems of the proposed
new half dollar, production difficulties that the reduced content coin would entiUL
These problems are not encountered with the present silver-content coins and
which will serve only to compound the mint adjustments to the proposed dime and
quarter. For instance, the mint has only a limited capacity for melting and rolling
silver-copper alloy strips and would have to purchase those strips from an out-
side source. All of the bonding or cladding operations for this proposed ecdn
would have to be performed in private plants.
The justification for the continuation of some silver in the half dollar can
hardly measure up to the potential ramifications of such action. The tradition-
alist calling for a link with the past, in the words of the Treasury study "must
not be allowed to obstruct the transition to a secure coinage system, adequate to
the needs of the present."
■dbyGoogIc
94 COINAGE ACT OF 1985
PKOPOSED CONIE AUXNDUDNT TO H.B. 87M, TBS GOIHACIII ACT OP IHI
!riiUI
Section 1-a-l ie deleted.
Section 2 beeomes Bection 1 and reads ae follows: "A half dollar, or 50-cent
piece, a quarter dollar, or 25-ceat piece, and a dime or lO-cent piece each of which
Blmll be composed of an alloy of 75 percent of copper and 25 percent of nickel
clad on a core of pure copper."
The Chairman. Now we will hear from these two gentlemen.
And next we will hear from Mr. Stevens and his group.
Mr. Hardy and Mr. Strauss?
STATEIHENT OF ROBEBT H. HABDT, JZ., CHABtHAM OF THE
SUVEB COHMITTEE OF THE AHERICAX mSSSQ CONOKESS
Mr. Hardy. Thank you very much.
My name is Robert M. Hardy, Jr., and I reside in Santa Barbara,
Calif. I am chairman of the Silver Committee of the American Mining
Congress.
It is a privil^e and a pleasure to appear before you today to discuss
the legislation confrontmg you. I wb grateful for the opportunity.
The American Mining Congress has brought to the attention of the
executive branch of the Government and both Houses of Congress its
views on the constitution of silver eoina^. We feel very strongly
that a coinage of intrinsic value is the comage that will demand the
respect not only of all people but of all nations and will best serve the
purpose as a circulatmg medium. We have pointed out that the
silver content must be raluced; the simple reason being that there is
too much silver in the individual coins now being minted. We have
considered the ai^uments advanced for the elimination of silver in the
35-cent piece and the 10-c(mt piece, and we do not find that they
override our viewpoint. We feel that there is enough silver for reten-
tion of some in not only the 50-cent piece but in the 25-cent piece
and in the 10-cent piece.
The main problem seems to be one of looking ahead to the supply
of silver that will be avMlable. I would like to point out that the
present price of silver has existed since September of 1963 and that
the short time since then has not really been long enough to properly
assess the potential of the future. We of the American Mming
Congress have been studying this problem for some time and last fall
released some of the results of oin- studies in that we would see by
1968 an increase of 38 million ounces in worldwide sUver production,
which I must say was a very conservative estimate and in no way
optimistic. The figures were derived from projects either already
underway or for which the capital had largely been committed, and
was a first appraisal of a situation which changes continually and, I
must say, on tne upward side.
We see underway throughout the world at the present time not
only the reopening of old mines, but the exploration for and the de-
yelopment of new properties which will, I am sure, increase that
prociuction potential remarkably over the 38 million ounces seen last
fail. After all, the production of a metal from the ground is not a pro-
tedure in which you plow, seed, fertilize, cultivate and harvest. It
is a process in which you must find the deposit and then force the earth
■dbyGOOgIC
COINAGB ACT OF 1965 9&
to disgorge it. This is a project which takes time, toil and effort aod,
I must say, a good deal of money.
I would like to call to your. attention the story of uranium which,
while not under discussion here today, illustrates so well what happens
when one considers a metal that must be found and produced.
Back in 1949 we supposedly had very little uranium in this country,
being dependent upon the Great Bear Lake deposit in Canada and
mostly upon the Belgian Congo. Russia had just exploded her
first atomic bomb and we were desperate.
After due deliberation, a price of $3.50 per pound for uranium oxide
was announced and the search commenced. By 1953, the develop-
ment of the Colorado Plateau deposits was underway. Soon the
extensions of the area into New Mexico and Wyoming were outlined,
as were the Blind River, Ontario, and other Canadian projects.
Ten years from the ajmouncement of the guaranteed price, we had
more uranium in sight that we could use for the time being, whereas
we had been woefuOy short in 1949.
Again, the point is that it takes time and effort to bring about the
devdopment of a mineral deposit so that it goes into production.
It does not occur overnight, yet production does answer the call of
Erice. Price in this instance does not mean that the producer is
loking for a higher profit. It means that price must cover the cost
of exploring for, developing and pajdng the cost of production so that
the mineral may become ore and pass into trade and commerce.
Another example that I might point out to you has already beeu
brought to your attention through the introduction into these hearings
of the Treasury Staff Study of Silver and Coinage bythe Secretary,
Mr. Fowler, and I quote r
Inoreasee in copper and zinc production in the postwar period have far exceeded
tiie expectations generally held in the early 1950'b. It ifi interesting in this con-
nection to compare the actual increases that have occurred with the projections
for 1975 made by the Paley Commission in 1952.
The Treasury study goes on to show that by 1962 copper production
had already exceeded the Paley Commission's estimate (or 1975 by a
wide margm, that world copper reserves are very large and that the
Paley estimate for 1975 is quite unlikely to be accurate.
I m^ht say the same is true of any Treasury estimate of the pro-
duction of silver.
Another aspect which has received little attention is that of the
newer techniques of exploration which are just beginning to be
utilized. You have all heard of the Timmins discovery of Texas gulf
sulfur. That was made by the diamond drilling of an anomaly
initially outlined by airborne electromagnetic detection methods.
There was no surface exposure, but the techniques piapointed the
deposit.
These geophysical technigueB are strikingly effective, and we have
many areas in this country alone which are susceptible to their employ-
ment. For instance, I hare information concerning a deposit of over
a billion tons located in the California desert, which has been outlined
by the newer techniques and is said to contain minable values in
molybdenum and gold, with about one-half an ounce silver per ton.
If this is brought into production on a large scale, the U.S. production
of silver will be enhanced remarkably.
■dbyGOOgIC
96 COINAGE ACT OF 1985
In summation, there ia silver to be had, enough to satisfy the needs
for coinc^e and for industry. However, it must be wrested from the
earth by toil and effort, and will not spring forth readily in answer
to a cry of panic. On the other hand, wiat cry of panic will not stop
it from coming forth in answer to a need.
Thank you very much.
The Chairman, Thank you, Mr, Hardy.
We will hear from Mr. Strauss.
STATEMENT OF SIHON D. STRAUSS. VICE FRESISENT, AHERICAN
SHELTING & BEFmiNa CO.
Mr. Strauss. Mr. Chairman, members of the committee, my name
is Simon D. Strauss. I am a vice president of the American Smelt-
ing & Refining Co,, a large miner and refiner of silver. 1 am also a
member of the Silver Committee of the American Mining Confess.
For 173 years the subsidiary coinage of this country, based primarily
on silver, has been maintained without substantial change, a record
that ia unique in economic history. The legislation before this com-
mittee would end that era, primarily because of the dwindling reserves
of silver held by the Treasury.
Silver miners have been calling attention for years to the problems
that would certainly arise because new silver production, lacking
sufficient incentives, was lagging behind demand. Until recently
these representations were given little heed.
We agree that a change in coinage cannot now be avoided. But
in agreemg, we do not mean to imply acceptance of the suggestion
made by some that silver has no place whatever in the country's
coinage system.
On the contrary, we believe the lesson of history is clear, that
currency systems oased exclusively on flat money are in the long run
doomed to drastic devaluation.
The ancient Greek city states and the great Roman Empire started
out with coinage of intrinsic value. But as they gradually watered
tiieir coinage down, so did their economy suffer.
In modem times we have seen the currencies of great industrial
nations, Germany, Japan, Italy, and France, depreciate in value
almost to the vanishing point as their governments resorted more
and more to the printing presses and to token coinage. It is to combat
the loss of confidence by their citizenry as a result of this harrowing
experience that all four of these countries in the postwar period have
resumed the coinage of silver. These governments could realize a
larger seigniorage profit today by issuing coins only of base metals.
Why do they spend the money to buy silver instead?
Because they seek the confidence of the man in the street, and they
know that silver coinage helps. It touches a deep instinct in the
average human, the desire to possess something of intrinsic value
or to have it readily available to him.
One cannot deny that a base metal coin bearing the imprimatur
ot the U.S. Government will be accepted at full face value over the
shop counter. It will be legal tender if the Congress say« it is, and as
your chairman remarked yesterday it can be used in the discharge of
all debte.
■dbyGOOgIC
COINAGB ACT OF 1965 97
But, in the long run, if only base metal coins and paper bills are
available to the average citizen, will his confidence in his currency,
will the purchasing power of the dollar hold up as well as under a
system where part of the circulating medium of exchange carries
intrinsic value ?
The learned economists may give you one answer, but the history
of the world gives another.
Today it is true that Great Britain does not have in circulation any
currency of intrinsic value, the change having taken place in 1946.
My prepared text incorrectly gives the date of 1964. It was 1946.
Whether the British will succeed in the long run has yet to be
determined.
So, gentlemen, while we agree that a change in coinage is now un-
avoidable, we ui^e you to retain silver to the maximum extent feasible.
The Treasury Department is recommending to you the retention of
silver in the 50-cent piece, and is suggesting that the question of the
dollar coin be reexamined by the proposed Joint Commission on the
Coinage after the termination of the transition period for issuing the
new subsidiary coins.
This strikes us as an absolutely minimum program with respect
to silver.
Just as we called attention to the deficit in silver supplies when
others considered the supplies ample, so now we believe many of the
statements with respect to the shortage of silver are exaggerated.
For example, attached to Secretary Fowler's statement before
this committee on June 4 was a tabulation that showed a deficit
of 205 million ounces in supplies in 1963, and 335 million ounces in
1964 — huge figures in relation to the present Treasury stock of 1
billion ounces.
But the Secretary compared total demand for silver, industrial and
coinage, with new mine production.
Those of us in the metal industry know only too well that on the
supply side, one cannot overlook the flow of metal salvaged from
scrap and residues. Good figures on this supply are hard to come by.
Handy & Harman estimated that in 1964, 20 milhon ounces were re-
covered from demonetized coin of countries other than the United
States and that salvaged scrap amounted to about 1,400,000 ounces.
But, frankly, our impression as a lai^e refiner or silver is that this latter
figiu'e is much too low. Work now being done on recovery of silver
from photographic scrap shows great promise for increased yields.
More sigmficant in judging the extent of the true gap between de-
mand and supply are two other factors — the acciunulation of inven-
tories by speculators and consumers, estimated by Handy & Harman
at 70 million ounces last year, and the inflated demand for alver coin-
age in the United States.
A major factor in the latter was, of course, the minting of the Ken-
nedy half dollar, most of which disappeared into private hands and
did not circulate. It would take a mmdreader to ascertain how much
of this withholding was due to sentimental desire for a memento of our
late President, and how much of it was due to hoarding for the silver
content. But our own guess is that sentiment rather man greed was
the major factor.
In any case, over one-third of our total 1964 use of silver for coinage
was in tne Kennedy half dollar.
Digitized byGoOgle
98 COINAGE ACT OF 1&66
The heavy demand for the dime and the quarter was out of all
proportion to previous years, even allowing for growth in population
and the higher rate of business activity.
Thus, in our view, the realistic gap betwewi demand and supjily in
silver, instead of being 33S miUion ounces is more probably m the
order of 150 to 180 milhon ounces annually, based on 900 fineness
We agree that part of this gap must be met by cutting down on
coinage requirements. The figures in the Treasury staff study indi-
cated that the 900 fineness coin normal demand would be on the order
of 100 miUion ounces a yeax, and that a 400-fineiiess-clad coin for the
10-, 25-, and 50-cent pieces would require about 50 to 60 miUi<m
ounces annually, after the transition period had been ended.
To meet this, the Treasury has available not only the biUion ouscee
of silver in its stocks, but also the silver content of 1,900 million
ounces contained in coinage now circulating.
How much of this the Treasury would recover is perhaps debatable.^
But no one should make the mistake of assuming that this huge stocls.
o£ silver has forever disappeared from the marketplace. In one form
or (uiother, most of it will eventually find its way back, and it will be
available either for the minting of new coins, or for the satisfaction
of industrial requirements.
Mr. Hardy has dealt in detail with the outlook for supply. Let me
say only that the failure of mine production in this coimtry to rise'
has been due primarily to the \&ck. of economic incentives. While
the price of silver is up, it has risen less than the prices of other major
nonferrous metals in the postwar period, and much less than operating
costs. Nevertheless, because two-thirds of the increase in price has
occurred within the last 3 years, more exploration and development'
work is now underway on silver projects than at any time in the last
30 years. If exploration expenses could be written off currently for
tax purposes, this would give a further incentive for more prospecting.
In any case, nune production is now rising.
In the first quarter it was up 17 percent over the corresponding
period of 1964 in the United States, and substantial further increases
can be expected.
The legislation befOTe you contemplates the fixing of a minimum
price of $1.25 an ounce for domestically mined silver. This floor
price was not sought by the mining industry, nor do we attach any
great importance to it. Past experience has taught us that, if we
accept floors, we may also expect ceOings. So far as we are concerned,
we would be just as happy without it.
We share with the Secretary of the Treasury his grave'reservationa
about a system of elaborate controls on exports, boarding, et cetera.:
We recognize and sympathize with the motives that prompt Isolators
to outlaw speculation and accumulation of silver at this crucial time
with respect to coinage.
However, silver is a very valuable commodity, and controls that
win be observed by honest people are an open invitation to the
racketeer and the criminal. A two-price system in silver with higher
prices abroad would invite reverse smuggling across the borders.
Considering the large number of our citizens who work in Mexico and.
Canada, and of Mexicans and Canadians who work in the United
States, and cross the borders daily, policing regulations would be a
Digitized byGoOgle
COINAQE ACT OF 1966 99
Herculean task. They would involve invasion Of personal privacy
to a degree that mi^t be intolerable to many.
Gentlemen, we fully recognize the gravity of the situation but we
do not believe it justices swingmg to 5ie extreme of completely elim-
inating silver from coinage. We feel that the Treasury program for
continuing silver in the haU dollar is a minimum step, and that
actually a greater use of silver could be contemplated with reasonable
safety.
Thank you, gentlemen, for the privilege of appearing.
The Chairman. Thank you, sir. We appreciate your statement.
You gentlemen remain available, if you will, please, and we will
caUyou back later for questioning.
We will now hear Mr. Stevens, Mr. Frank Wemple, Mr. Fraakovich,
Mr. Ramsey, and Mr. Welfling.
Now, you gentlemen have statements to make. You may inseri
any remarks you desire in addition to the statements that you actually
deliver.
We appreciate your cooperation in the interests of time.
Also, Mr. Moms is here.
Mr. Stevens, you may identify yourself, sir, and proceed.
STATESEHT OF JOHN B. STEVENS, EXECTTTIVE VICE FEESIDENT,
INTERNATIONAL SILVER CO., AND CHAXSHAN OF THS EXECU-
TIVE COMinTTEE OF THE SILVER USEES ASSOCIATION; AC-
GOUFANIED BT FRANK WEMPLE, TREASURER, HANDT &
HARUAN; GEORGE E. FEANEOVICH, EXECUTIVE DIRECTOR,
MANUFACTURING JEWELERS & SILVERSMITHS ASSOCIATION;
DONALD J. RAMSEY, WASHINGTON LEGISLATIVE COUNSEL,
SILVER USEES ASSOCIATION ; DR. WELDON WELFLING, WESTERN
RESERVE UNIVERSITY; ALSO ACCOMPANIED BT JOSEPH T.
MORRIS ON BEHALF OF THE NATIONAL ASSOCIATION OF
PHOTOGRAPHIC MANUFACTURERS
Mr. Stevens. Thank you, Mr. Chairman.
I would like to say at the outset that I will make a brief statement
first, and then would hke to ask in this order — Admiral Ramsey, Mr.
Wemple, Dr. Welfling, Mr. Morris, and Mr. Frankovich to make
their statements.
Mr. Chairman, I welcome the opportimity to appear before your
committee. I am John B. Stevens, executive vice president of the
International Silver Co., Meriden, Conn., and general manager of its
silverware division. I am also chairman of the executive committee
of the Silver Users Association. My purpose in being here today is to
testify before this committee as to the effects the proposed legiiation
to change the content of our coins will have upon the thousands of men
and women who depend upon silver for their livelihoods.
At the outset, may I commend this committee for its prompt and
efficient response, and the Secretary of the Treasury for his clear and
well spoken testimony before this committee. I am pleased with the
President's decision to eliminate the use of silver in dimes and quarters,
but greatly concerned over the proposal to mint half dollars of a 40-
percent silver content.
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100 COINAGE ACT OP 1966
The retention of any silver in subsidiary coinage is of vital concern
to manufacturers of suverware, both lai^e and small.
This legislation represents one of the first major changes in our
coinage system since 1792; it includes a new type of coin, a silver-clad
50-cent piece, which bears the likeness of President Kennedy. This
would create a collector's paradise; hence, a downright waste of 15
million ounces of silver, or close to 80 percent of 1 year's requirement
for silverware. Think of this in terms of productive returns to our
economy, in terms of employment, or lack of it.
As you know, the silverware industry is one of the oldest industries
in the United States, first established by the early settlers of New
England. To quote one of my associates, "its history is the history
of American industry in the best of traditions." How true this is.
We believe in tradition, but not at the expense of jobs which would be
jeopardized by the continuation of silver m coins.
Our industry grew with our country. Our industry improved with
the development of new manufacturing techniques, and our industry
prospered through the hard labors of our self-priming economy. The
question of supplies of silver is of vital concern to the silverware
industry for, without it, we have no business whatsoever. The
question of price is also of great concern to us, because the proportion
of raw material to total manufacturing cost is extremely high. We
take great pride in our craftsmanship, and we strive to provide the
public with fine silver products at the lowest possible price. This
may no longer be possible. It is believed that the prestige and tradi-
tions of the silverware industry far outweigh the rather intangible
prestige that one silver-clad half dollar is supposed to impart to our
coinage system. Our silver dollar is still our only prestige coin and,
as one of the members of this committee pointed out last Friday,
this is the reason why it has disappeared from circulation.
The silverware industry, whicii I represent, is besieged with many
of the same problems which other industries face, but by far the most
important consideration is the availability of silver itself. In sterling
silver flatware, for example, about 75 percent of our manufacturing
cost is the cost of silver itself. We use a very high percentage of
silver in tenns of our actual product. You are all familiar enough
with silver to know that the price of silver has increased tremendously
over the last 10 years. For example, in 1952, the price of silver was
85 cents an ounce. Today, silver is at the current level of $1,293
per ounce. This represents a 52-percent increase, gentlemen. This
IS a very large cost to absorb. Our market has been narrowed be-
cause we must pass on this cost to our consumers in order to stay in
business. We have many would-be consumers who feel they cannot
afford to buy silverware. The silverware industry feels that the
upward spiral action on the price of silver was created by Govern-
ment option, taking such a large stock off the market at above market
prices. This may have been necessarv at the time to protect the
mining industry, but it is certainly no longer necessary for the Gov-
ernment to resume buying of silver. The cost we have had to pass
on to our consumers and would-be consumers is beyond our control.
Mr. Simon Strauss, vice president of American Smelting & Refining,
has raised a question of priorities. He asks in the February 1966
issue of Mining Engineering:
■dbyGOOgIC
COINAGE ACT OF 1966 101
Is it more important to have silver for spoons and forks than to have silver for
coina? MiltioiiB of people every da; are eating meals with atainless Steel flatw&re;
others, understandably, prefer silverware. But is it more important to satisfy
this preference than to have silver for coins?
Certainly people can eat with stainless st«el. They can even eat
with their fingers if they prefer. I ask Mr. Strauss why it is important
to have silver for coins. It the proposed half dollar b to be looked on
as a "prestige" coin, then our national prestige has dropped as a
ratio from 90 to 40.
I repeat, we are very pleased with the Treasury's recommendation
to eliminate silver from dimes and quarters. Given the facts, this ia
the only logical conclusion one could arrive at. Mr. Chairman, I
submit that the national interest would be better served if the legida-
tion now under consideration were to be amended in such a way to
permit the minting of half dollars of the same alloy as dimes and
quarters. I believe your decision should be utilitarian, rather than
political.
In summary, the silverware industry endorses the action taken by
the administration in recommending the minting of dimes and quarters
without silver.
Admiral Ramsey, legislative counsel for the association, will discuss
the proposed legislation in more detail and other members representing
different segments of our industry will also testify briefly.
I would Hke to say there are other factors in the silver using industry
which are important, some of them larger users of silver than the
silverware industry. I believe that many people are under the
impreHsioi> that the most important user is the silver and jewelry
industry. But in actual fact, the photographic and electrical indus-
tries are greater users of silver.
Thank you very much.
The Chairman, Mr. Stevens, would it be satisfactory for these
other five gentlemen to file theii statements, and one speak for all of
you, or would you like each one to say a few words and present his
statement?
Mr. Stevens. Mr. Chairman, we would like each one to say a few
words.
The Chairman. Well, suppose you present them, then, in the order
which you want them presented, and take care of the time on it,
Mr. Stevens. Fine, sir.
Admiral Ramsey will be the first.
STATEMENT OF BEAR ADU. DONALD J. KAMSET, n.S. NAVT.
RETIRED, LEGISLATIVE COUNSEL POR THE SUVER USERS
ASSOCIATION
Admiral Ramsey. I am Rear Adm. Donald J. Ramsey, U.S. Navy,
retired, legislative counsel for the Silver Users Association, whose
members use approximately 75 percent of the amount of silver con-
sumed in the United States. A list of the members is attached to
my statement.
I should also like to compliment the Treasury and the President for
their efforts to find a solution to a very complicated problem.
I also would hke to compliment the chairman of this committee for
his prompt action in handhng this legislation as well as the legislation
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102 COINAGB ACT OT 1966
which became Public Law 88-36 on June 4, 1963. At that time there
were dire predictions as to what would happen to the country if we
demonetized silver and issued $1 Federal Reserve notes. The chaii^
man persisted in his efforts and the Nation seems to have surviv&d.
I think it will survive without silver in coins.
There has been considerable talk about there being something for
everyone in ^s bill. It has been said that the vending maoiine
industry came out first, followed by the producers, then the users.
If silver is completely removed from our coinage, and if it becomes
available for industrial users where it is essential, I would say the
public has come out on top.
At the hearings held yesterday, Mr. Chairman, a tel^am was put
in the record which indicated the endorsement of the Silver Users
Association of this bill. There must be some mistake, and it is re-
quested the record be corrected. The position of the association is
as follows :
The Silver Users Association supports the proposals contained in
H.B. 8746 to mint quarter dollars and dimes composed of an alloy of
75 percent copper and 25 percent nickel clad on a core of pure copper.
The composition of these coins was determined by the requirements
of coin-operated machines.
The association strongly opposes the proposal to mint half dollars
containing 40 percent sUver. It urges the minting of half dollars of
materials which contain no silver.
Opposition to the use of a^ silver in subsidiary coins is based on
the silver supply situation. It is estimated that the deficit between
free world production and industrial demand in 1965 will be 75 millioQ
ounces. The deficit between U.S. production and demand will be
about 90 million ounces. These deficits will increase because industrial
requirements will be increasing fast«r than new production increases.
This deficit is now made up by the U.S. Treasury through the redemp-
tion of silver certificates for bullion. The use of any silver in sub-
sidiary coins reduces the amount of silver available to make up this
deficit.
The President and Secretary Fowler have pointed out that there is
no dependable or likely prospect of new, economically workable sources
of silver that would appreciably narrow the gap between supply and
-demand. The Secretary stated this to be the opinion of experts both
inside and outside the Treasury. Both stated tnat optimistic projec-
tions envision an increase of no more than 20 percent over the next
4 years and the President aptly pointed out that this would be of
little help.
Secretary Fowler has stated that after the proposed new coins are
in full production, no more than 15 milhon ounces of silver should be
required for the minting of half dollars. While even this amount of
needless consumption is undesirable, we believe it to be a low estimate.
Two hundred and six million Kennedy half dollars were minted in
1964 and with the proposed silver content of 40 percent this would
require 33 mill ion ounces of silver. After 16 months of production
the Kennedy half dollars are still in short supply. No one can predict
the normal coinage demand.
Secretary Fowler said that what he calls "the industrial and arts
problem" will not be solved by whether we do or we do not utilize
silver in our half dollars; however, the minting of these coins at the
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COIKAQE ACT (JT 1066 103
1964 rate would tisis up enough silver in 4 years to supply U.S. industry
for 1 year or make up the free world deficit for 2 years. Such facte
cannot and should not be overlooked.
The stated reasons for maintainiog silver in the half dollar are for
prestige and to continue the tradition of silver in coinage in spite of
the fact that the President's statement and Treasury report dispute
the need for any value in our coins other than that they serve aa a
circulating medium of exchange. These considerations, plus the
fact that the proposed coin is unique in its composition, can only meaa
that instead of representing preatige it will become a collector's item
at least as much in demand as the silver dollar and Kennedy half
dollar, neither of which is seen in circulation.
Why does this country need a prestige coin? Only now, after 173
years, when the proponents are hard pressed to justify a 40-percent
silver clad coin are we told we must have such a coin. No nation on
earth presumes to mint a "prestige" coin with only 40 percent silver.
France, often cited as a major nation using silver in coins, mints
two silver coins. But both have paper equivalents. The 5-franc
coin containing 83.5 percent silver has disappeared from circulation.
The 10-franc coin containing 90 percent silver ia designed for hoarding
in order to combat inflation. Italy mints a 500-Ure coin containing
83.5 percent silver with a paper equivalent which is bein^ withdrawn.
Both countries have had volatile monetary and financial histories.
Perhaps they need a high content silver "prestige" coin.
The United Kingdom shifted all silver coins to cupronickel in 1947.
In 1964, while the United States was consuming 203 million ounces of
silver, the rest of the world, excluding commemorative coins, used only
40 miUion ounces in coins, with Canada using an estimated 14 million.
The silver policy of the United States as set forth in the President's
Economic Report to the Congress in January 1963 is "to reflect the
status of silver as a metal for which there is an expanding industrial
demand." Public Law 88-63 was enacted to carry out this pohcy.
This law spelled out the obligation of the Treasury to redeem silver
certificates on demand with either silver dollars or sUver bullion at
the rate of $1.29 per ounce. This law also authorized the Treasury
to use excess silver for coinage and to sell excess silver to other depart-
ments and agencies of the Government. While redeeming sdver
certificates the Treasury has also been retiring certificates to obtain
silver for coinage. It is this coinage drain on the Treasury stocks far
in excess of any anticipated amounts which has created the critical
coinage situation. It was estimated that 80 milhon ounces for coinage
would be required annually. In the 2 years since the passage of the
act, 366.9 million oxmces have been required. This is an average of
ISO million ounces, and the rate is now 27 million ounces per month.
On the other hand, redemption of silver certificates during the 2-year
period amounted to only 207 million ounces.
It should be borne in mind that the Treasury, although authorized
to sell silver, does not sell silver outside the Government, nor does it
fix the market price for silver. However, the fact that the Govern-
ment carries out its legal obhgation to redeem sUver certificates at
the rate of $1.29 per ounce obviously keeps the market price from
rising above that level.
The Treasury stocks of silver bulUon now amount to 1 billion
ounces. It has been indicated that 300 million ounces of silver will be
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X04 COINAG£ ACT OF 1965
required for the necessary continued minting of present silver coins,
A stockpile requirement of 165 million omicea has been announced by
the Office of Emergency Planning. Redemption of silver certificateB
at the present rate may require 125 million ounces this year. Thus,
Treasury stocks may be reduced to around 400 million ounces during
the next year. This amount would be available to those who desire
to have silver certificates redeemed with silver as guaranteed by the
Government when the certificates were issued.
The Treasury stock of silver was excess silver removed from the
market over a period of 30 years in order to raise the price. Ability
to obtain this silver now makes up the deficit between production and
consumption in the market. This in turn protects our silver coins in
circulation by stabihzing the market price at the guaranteed redemp-
tion rate of $1,29 per ounce.
Any coinage requirement for silver, however small, would be of
serious consequence. In addition to reducing the supply it would
maintain a speculative interest in silver which would result in increased
redemption for speculative purposes. When the Treasury stocks are
exhausted, the Government would be forced into the market to buy
■silver where there is £in ever-increasing deficit in supplies.
As previously pointed out, the Treasury could control the minting
of the proposed 50-cent piece, but this would in fact only serve to
make it more desirable. It would disappear down the way of the
silver dollar. If a 50-cent piece is required as a medium of exchange
in our monetary system, it should be minted in sufficient quantities
to insure its circulation.
The Chairman. Admiral, will you cease just a moment, please.
Now, of course, obviously we do not have time for each witness
to read all of his statement. If each witness will present just a part
of it, the members will ask questions of the panel, which will enable
the witnesses to bring out many of the points that they desire to bring
out. That way it will save a lot of time,
Mr, Stevens. All right, Mr. Chairman. I would like Admiral
Bamsey to comment on this.
Admiral Ramsey. Mr. Chairman, we have some specific objections
or suggestions to this bill which only I will bring up.
The Chairman. Veiy well. We would like to have the members
given a privilege of asking some questions after you gentlemen take
the time you have indicated,
Mr. Stanton. Mr, Chairman, of course you know there are a lot
of new members on this committee, and this is an extremely important
subject. Even if it is going to take a couple more days, I think it is
wtJl worthwhile for the members of the Banking and Currency Com-
mittee to Hsten to the testimony in full from these gentlemen and
anybody else who has something to say on the subject.
The Chairman. It is my understanding that these gentlemen favor
the bill generally. Is that correct?
Admiral Ramsey. We oppose the minting of sUver half doUars.
And we do have
The Chairman. I wish you would confine your argument to what
you are opposed to.
Admiral Ramsey. I have two pages, Mr. Chairman, which will
spell out our fpelinfrs and objections to this bill.
The Chairman. Gu right ahead. Admiral. Your statement is
very interesting.
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COINAGE ACT OF 10«S 105'
Admiral Eauset. Thank you, sir.
We urge this committee to amend this bill to provide for a 50-cent
piece ma^e of the same material as the <juarters and dimes or al-
ternatively of some other suitable material not containing silver.
The Treasury staff study of silver and coinage concladed that cupro-
nickel is the best permaneDt material for nev subsidiary coinage,
ignoring the vending machine problem.
Section 4 permits the continued muiting of coins now authorized by
law. Secretar-y Fowler in his prepared statement said this section
provides for the continued minting of the existing coins as needed
until production of new coinage is adequate. It is recommended that
a sentence be added to this section which speUs out the Secretary's
intention. Suggested wording i.s as follows;
However, the minting of the half doUars, quArtera, aad dimes shall be confined
to the colas provided for in this act when the production of such coins is con-
sidered by the Secretary of the Treaaury to be adequate.
There is no limitation in the bill now as to how long the Secretary
m^ continue to mint silver coins.
We feel that there should be some limitation on this authority.
Section 5 authorizes the Secretary of the Treasury to prohibit the
exporting, melting, or treating of the coins of the United States.
The views of the association concerning controls were expressed in a
letter to the Secretary of the Treasury dated May 10, 1965, a copy of
which in attached to this statement as exhibit 2.
The proposed penalty for violating any rule or regulation or license
issued for melting down corns is $10,000 or imprisonment for not more
than 5 years or both. While this may be intended for lai^e-scale
violators, it makes criminals out of individuals who, for instance, may
even today melt down silver coins to obtain a few ounces of coined
silver for the purpose of making silver trinkets. Articles of coined
silver have been very popular throughout the ages. Persona who
obtain silver coins pay for them. It is not their fault that the intrinsic
value of our coins is nigh enough to make them worth melting down.
It is urgently requested that if the Treasuiy b forced to resort to
{irohibition against melting down, such prohibition be in effect only
ong enough to serve its purpose and that the right of citizens to do
what they wish with coins is restored. The Silver Users Association
is not opposed to standby controls so long as, if invoked, they are
abandoned when no longer necessary.
Section 6 gives the Secretary of the Treasury authority to sell
excess silver at "not less than the monetary value thereof." Section
7 not only authorizes but directs the Treasury to purchase domestic
sUver at a fixed price when tendered. The Secretary of the Treasury
has stated that section 7 was designed to provide a floor, inasmuch as
section 6 provided a ceiling. It is felt that this ceiling should be
swelled out and that the Secretary of the Treasury should also be
directed to sell silver at the fixed price of $1.2929 per ounce.
The Silver Users Association is concerned over the wording in
title II, section 3, which provides that the Joint Commission on
Coinage shall review and give advice and recommendations with
respect to, among other things, the time when and circumstances
under which the United States should cease to maintain the price of
silver. Although, because of coinage considerations, the United
States must stand ready to sell in order to maintain the price of
Digitized byGoOgIC
106 COINAGE ACT OP 1965
silver, it is the redemption of silver certificates as required by law
which stabilizes the market price at Sl-293. This redemption is the
fulfillmeDt of a pledge to redeem certlQcates with buUioa on demand.
It is not dear whether this reference to "maintain the price" refers
to the $1.25 buying price established by title I, section 7, or to tho
redemption value of silver bullion for silver certificates of $1.29. It
shoula be clear that the Treasury does not currently have any obli-
gation to fix a market price for silver, but it does have a commitment
to redeem silver certificates with 0.7734 ounce of silver per dollar.
Only when free market prices rise to this point does redemption take
place.
It is hoped that the committee will take action to remove these
imcertainties. Thank you.
The Chairman. Now, you have in connection with your statement
a list of the members of your association and also a letter to Secretary
Fowler, which, of course, will be inserted in the record at this point
in connection with your statement.
Admirri Kamsbt. Yes, sir.
(The material referred to follows :)
Members or the Silveb ITberb Asbociation
The members of the Silver TIaers Aasociation ubc approKimately 75 percent of
the amount of silver consumed in the United States. The total consumed in'
1964 is estimated to be at 123 million ounces.
Photographic materiale:
Eastman Kodalc, Rochester, N.Y.
Kilbom Photo Paper Co., Inc., Cedar Rapids, Iowa.
Xeroi Corp., Rochester, N.Y.
General Aniline & Film Corp., New York, N.Y.
Powers Chemco, Inc., Glen Cove, N.Y.
Silverware!
Gorham Corp., Providence, R.I.
International Silver Co., Meriden, Conn.
Samuel Kirk & Son, Baltimore, Md.
Lunt Silversmiths, Greenfield, Mass.
Oneida Limited, Oneida, N.Y.
Reed & Barton, Taunton, Mass.
Stieff Co., Baltimore, Md.
Tiffany & Co., New York, N.Y.
Towle Manufacturing Co., Newburyport, Mass.
Wallace Silversmiths, Wallingford, Conn, (subsidiary of Hamilton Watch
Co., Lancaster, Pa.)
Dental supplies:
L. D. Caurk Co., Philadelphia, Pa.
Chemicals;
Ames Chemical Works, Inc., Glens Falls, N.Y.
Catalyst Development Corp., Little Ferry, N.J.
Fabricated and industrial products:
Dixie Bronze Co., Birmingham, Ala.
Engelhard Industries, Newark, N.J.
Handy & Harman, New York, N.Y.
The Silver Users Association also represents the following associations:
Manufacturing Jewelers & Silversmiths of America, Inc.
National Association of Mirror Manufacturers.
Retail Jewelers of America, Inc.
■dbyGOOgIC
COINAGE ACT OF 1966 107
May 10, 1965.
Hon. Hbnrt H. Fovi^bb,
Seerdary of tht Treasury,
Waahinglon, D.C.
Dbab Mb. Secbetart: At v&riouB meetings with Treasury officials, the Silver
TTserB Association has been asked for its views on the subject of controls and other
actions which might t>e taken in connection with silver bullion and coins, with
particulfir reference topropoaed chimges in coins. At a meeting on May 4, with
Assistant Secretary Wallace and Acting General Counsel Smith, the former
Bu^ested that a letter be written to you expressing the views of titc asBociation.'
The question of controls arises from the possibility that present high-content
coins may disappear from circulation to the extent that trade would be disrupted.
This situation will occur if these coins are more valuable for their metal content
than they are for their face value as a purchasing medium, or if the public believes
this will be the case.
The basic position of the association is that controls will not be necessary if —
(1) The public is aasured that the Treasury will continue indefinitely the
redemption of silver certificates at the present rate as required by law, and if
(2) The use of silver is eliminated in subsidiary coinage.
The TreaBury must continue the redemption of silver certificates at the present
rate at least until sufficient new coins are in circulation to meet our coinage
requirements. This redemption, or Treasury sales at this rate, should be con-
tinued indefinitely in order to stabilize tlie market. This silver was originally
acquired to foroe the market price up to its present level at $1.29 per ounce. It
should now be used to stabiliae the price at this level. As long as bullion is
obtainable through the redemption of silver certificates, at the present rate, coins
will not be melted down for their bullion content. The retention of silver in any
amount in any subsidiary coin will increase the current speculative interest
which obviously results in hoarding of coins.
LegisUtivc proposals now before the Congress call for a minimum silver content
of 30 percent in all silver coins. They also call for a new redemption rate for
silver certificates of $4 per ounce, which would also be the minimum "monetary
value" of a proposed new silver dollar. The retention of silver in any coin at a
reduced level will raise the monetary value of the coin, thus adding to the confusion
and speculative interest. The monetary value is believed by many to be tied into
the market price, and today they are almost identical in the case of the silver dollar.
The retention of any silver in subsidiary coins means that sooner or later the
Treasmy will be forced into the market to buy silver. Statistics which are avail-
able clearly indicate that there is now a 25-pcrcent deficit between production and
industrial consumption. This deficit is increasing and is made up with silver
obtained throuEh the redemption of silver certificates. Consequently any possi-
bility of the Treasury entering the market for any amount of silver can only
iLccentuate the speculative bterest. The market supply situation is such that
there is no longer any necessity to provide a market for the producers of silver
through Treasury purchases.
Regardless of the material used in new coins, there will be increased interest on
the part of the numismatists and collectors. This will apply to new coins as well
as old. It is believed, however, that the problem will be minimized and within
tolerable limits if the public is assured that the metal content of silver coins will
not be worth more than their face value. On the other hand, any indication that
the metal content will be worth more than the face value will result in the disap-
pearance of such coins. This would be particularly true if the Treasury is required
to embark on a program which is dependent upon the withdrawal of these high-
content coins in order to provide silver for low-content silver coins.
The following actions have been suggested during the transition period:
(1) Prohibition of the melting down or hoarding of coins.
(2) Export controls of silver bullion and/or coins.
(3) Requirement of end-use certificates from those who obtain silver from
the Treasury,
(4) Reestablishment of the transfer tax.
Prohibition of the melting down of silver coins will be unnecessary as long as the
Treasury redeems silver certificates at the present rate, which it must do until
sufficient new coins are in circulation. Prohibition of hoarding would be most
difficult, if not impossible, to enforce. The establishment of a criteria as to what
titutes hoarduig would be a formidable task. Unlike the situation which
ed in conhection with gold coins, silver subsidiary coins are fractional money
48-838— «5 8
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lOS COINAOE ACT OF I»eS
and are necessary as a medium of exchange. The solution to the hoarding
problem appears to be the elimination of factors which are conducive to hoarding.
The association is not opposed to actions which may be necessary to insure the
circulation of coins as a medium of exchange. However, it is requested that all
parties affected be given adequate opportunity to be heard prior to such actions.
It is obvious from the foregoing that the underlying problem and its solution is
in the intrinsic value of coins. It appears clear that any factor which could make
present or new coins more valuable for their metal content than their face value
must be eliminated or avoided.
In summarizing the position of the Silver Usera Association with reference to
controls, it is sugacsted that the following steps be taken:
(1) Eliminate the use of silver in subsidiary coinage.
(2) Assure the public that the Treasury will continue indefinitely the redemp-
tion of silver certificates at the present rate.
(3) Inform the public tliat the metal value of outstanding silver coins wiU not
exceed the face value.
(4) Minimise the discussion and use of controls,
(5) Make every effort to continue the unrestricted use of present silver coina.
Respiectfully,
Donald J. Ramset, Legislalim Counsel.
The Chairman, All these statements are good. I have looked at
most of them. Yours m particular, Admu'al Ramsey, is very fine.
In fact, all of them give valuable infonnation.
The committee members will ask questions to bring out additional
information, too. All right, you may call your next witness.
Mr. Stevens. Thank you, Mr. Chairman.
Realizing the press of tinae, I wonder if this would be satisfactory.
I would like to ask Dr. Welfling to make his statement, and then
ask that the formal statements of our other witoesses be filed, but
that thOT be permitted to briefly summarize their statements.
The Chaihman, That will be all right, if it is all right with you
gentlemen.
You may go ahead, sir,
STATEMENT OF DS. WELDON WELFLING, CHAIBMAN, BEFABT-
MENTS OP ECONOMICS AND BANKING AND FINANCE, WESTERN
RESERVE UNIVERSITY, CLEVELAND, OHIO
Mr. Welfling. Mr. Chairman and members of the committee,
my name is Weldon Welfling, chairman. Departments of Economics
and Banking and Finance, Western Reserve University, Cleveland,
Ohio.
Mr. Chairman, the first two pf^es of my prepared statement are
background material with which I am sure the committee is familiar.
I can just as well skip that. It is a description of the supply-and-
demand situation, with which I am sure you are familiar.
Your committee is meeting in an atmosphere of emet^ency and
urgency and I will try to cooperate by being brief. If in doing so I
raise questions I will be glad to try to answer them later.
The current situation presents an excellent opportunity to eliminate
silver entirely from the coinage. There seems to be no sound, eco-
nomic reason to treat the half dollar any differently than the dime
and quarter. There is no reason to use an expensive, previous material
for any use where a more economical material will serve as well. The
Treasury is obviously convinced that the proposed dime and quarter
will provide a satisfactory currency in terms of appearance, durability,
machine acceptance, difficulty of counterfeiting, and cost. If this is
Digitized byGoOgle
COINAOE ACT OP 1«65 109
tj-ue, there ia no economic reason why the same change should not be
made in the half dollar and many reasons why it should. The present
bill goes a long way toward solving the silver problem, at least tempo-
rarily, but the opportunity shoiUd be taken to solve it completely for
the foreseeable future.
Even if there were no emergency, logic would dictate making coins
as economically as possible. It must be emphasized that fractional
coins are purely a convenience. What they are made of, so long as
they are truly convenient, is irrelevant. Paper would serve, as it
obviously does in dollar bills, except that in small transactions it
happens to be leas convenient. The silver dime is no better than two
nickels or one nickel and five pennies. Ten dimes are no better than
a dollar Federal Reserve note, unless, indeed, the price of silver
rises above the coinage value. Then, the 10 dimes become more —
worth more than a dollar but only as silver, not as coins. Conse-
quently, they become very poor coins as they tend not to circulate
at all.
Under present circimistances, it is clearly preferable to eliminate
the coinage demand for silver entirely rather than to reduce it. All
of the available sdver should be mustered to stabilize the market
price until the new coinage system is fully operative. Unless this
price hne is held at least that long, we will be without coins until the
new type is in adequate supply.
It is natural that this committee will hear arguments favoring
retention of at least some silver in coins. These arguments have
httle economic validity. Reference is made to "sound" currency.
Our convenience coins are sound if they are convenient. The sound-
ness and value of the dollar have nothing to do with whether we make
our small change out of silver, copper, nickel, or plastic.
Intrinsic value has nothing to do with the problem. In the first
place, nothing has intrinsic value. Value is the result of supply and
demand. Reduce the demand for, or increase the supply of, gold,
silver, or peanuts and their value will decline. Actually the less
so-called intrinsic value a coin has, the better. It costs society lesa
to make, and it is less Ukely to be used other than as a coin. The
market price of the metal in a coin is irrelevant; four quarters were
a dollar when silver has cost the Treasury 50, 71, or 92 cents. We
certainly do not want full-bodied coins, as they are the most trouble-
some, as is in fact illustrated now by the silver dollar which has dis-
appeared, and the fractional coins which are threatened by the
same fate.
As to the arguments for retaining some silver, other than appeals
for intrinsic value, the only ones appear to be tradition and prestige.
Under existing circumstances, I see no persuasion in either. Tne
tradition of using silver as a coin in the United States started when
silver was used as standard money and was fostered by discoveries
of silver many years ago that made it a fairly economical material.
Certainly the tradition of using copper must be at least as respecta-
ble, datmg also from the Mint Act of 1792. As for prestige, I won-
der in whose eyes the United States of America gains prestige by
using a half dollar that is 40 percent silver. I see more prestige stem-
ming from the advanced technology that has created the sandwich
coin and that releases silver for more urgent uses.
■dbyGOOgIC
110 COINAQB ACT OP 1965
May I conclude by referring briefly to some well-known facts about
silver. First, silver mining is a minor industry indeed, prodncitw;
only $45 million worth — at historically high prices — in the United
States annually in recent years. Mexico and Peru both produce-
more. Annual output of asparagus, cabbage, and celery each exceed
domestic output oi silver. The sUver producing industry has im-
doubtedly received more favorable attention from Congress, from
1792 to 1964, pel- dollar of output and per employee than any other-
industry. Second, only four mines in the United States derive their-
principal income from silver. Most silver is obtained in conjunction
with or as a byproduct of other ores. And against consumption of
326 million oimcea in the United States in 1964, production was 36
million ounces, about 11 percent. Third, it follows that high prices,
of silver benefit mainly foreign producers at the expense of American
consumers of photographic supplies, tableware, Jewelry, and dental
material and as taxpayers paymg for the coinage system and for-
electronic devices. Fourth, it also follows that the price of silvOT has.
little effect on output. In spite of the market price rising to $1.29,
American output was 37 million ounces in 1960 and either 35 or 36
million in each subsequent year. Since 1934 the price has risen 80-
percent, but annual production is still the same because it is lai^ely
tied to output of copper, lead, and zinc. Fifth, and last, silver is just
another commodity. It has no inherent, intrinsic claim to be corned
any more than does copper or nickel or anything else unless it is the
most economical commodity for that use. In today's world, it is mor&
true than ever that silver is too valuable in other uses to be wasted
in coins, where other materials are now clearly more economical.
Thank you, Mr. Chairman.
The Chaibman. Thank you, sir.
(The complete statement of Dr. Welfling follows:)
Statbubnt bt Db. Weldon Welfliko, Chaibuan, Departubnts Ot Eco-
nomics AND Banking and Finance Western Resebve UNimBsiTT,
Cleveland, Ohio
Mr. Chairman and members of the committee, my name ia Dr. Weldon Wel-
fling, chairman, Departments of Economics and Banking and Finance, Western
Reserve University, Cleveland, Ohio.
Your committee is meeting in an atmosphere of emergency and urgenc7 and
I will try to cooperate by being brief. If in doing so I raise questions I will be
glad to try to answer them later.
The solution to the coinage problem cannot be delayed much longer. The
Seneral nature of the problem has been clear for many months. InduBtrial
emands for silver plus enormous coinage demands in the United States have
put upward pressure on the market price of silver. AH that prevents the price
from rising higher is the Treasury's ability to redeem silver certiacatea in exchange
for silver at the coinage value of $1.29 per ounce. Estimatea vary as to when the
Treasury's stock, now down to about a billion ounces, will be depleted but even
at present rates it will be exhausted in 2 years. As this point ia approached, the
mra-e rapidly will the stock be depleted.
In 1964, free-world production of silver amounted to 215 million ounces, only
36 million coming from the United States. The United States alone used 203
million ounces in coinage, with other nations using 61 million, for a total of 264
million ounces. Industrial consumption was 123 million in the United States, 163
mill i nn abroad, and a total of 2SS million ounces. Coinage and industrial usee
each eTcceeded total output. Output amounted to 40 percent of consumption.
The other 60 percent came from accumulated atocks.
An unknown but significant fraction of the demand is undoubtedly specula-
tive. When the Treasury is no longer able to supply the market the price will.
be tree to rise above $1.29. When it reaches $1.38 the silver in dimes, quarters,.
Digitized byGoOgle
COINAQB ACT OF 1«SS 111
-ftnd hftlves will make them full-bodied money, and at h^^er prices these coins
can be melted for the metal.
Such eqieiiences have happened twice before in our history. In Andrew Jack-
son's thne the price of silver was pushed up above SI. 29 and fractional coins
disappeared. The eventual remedy was the Subsidiary Coinage Act of 1853.
which was the first legislative recognition of the fact that fractional coins need
not be full bodies. Ilowever, the silver content was reduced only about 7 per-
cent, which gives ue the S1.3S figure. Durii^ the Civil War the price of silver
rose by this 7 percent and more, and again coins were melted while the Treasury
was unable to buy more silver. Both of these periods illustrated the great incon-
venience of not having a workable system of coins, and today the inconvenience
"Would be far greater with our vending machines, coin-operated machines, tele-
phones, toll boths, and so on.
Since the 1S70'e, silver supply and demand have been auch as to keep the
'price below the silver dollar equivalent of $1.29. In fact, at times the price has
been a quarter of that figure or less. Only a variety of price support programs
in form of coinage laws, going all the way back to the Bland-Allison Act of 1S78,
has kept the price from being lower. Today, however, the situation is reversed,
&nd d^nand far exceeds suj^ly at SI. 2!).
The current situation presents an excellent opportunity to eliminate silver
■entirely from the coinage. There seems to be no sound, economic reason to
(Mat the half dollar any differently than the dime and quarter. There is no
reason to use an expensive, precious material for any use where a more economical
material will serve as well. The Treasury is obviously convinced that the pro-
posed dime and quarter will provide a satisfactory currency in terms of appearance,
durability, machine acceptance, difficulty of counterfeiting, and cost. If this
is true, there is no economic reason why the same change should not be made
in the half dollar and many reasons why it should. The present bill Koes a
long way toward solving the silver problem, at least temporarily, but the op-
portunity should be taken to solve it completely for the foreseeable future.
Even if there were no emergency, logic would dictate making coins as eco-
nomically as possible. It must be emphasized that fractional coins are purely
a convenience. What they are made of, so long as they are truly convenient,
is irrelevant. Paper would serve, as it obviously does in dollar biUa, except
. that in small transactions it happens to be less convenient. The silver dime is
no better than two nickels or one nickel and five pennies. Ten dimes are no
better than a dollar Federal Reserve note, unless, indeed, the price of silver
rises above the coinage value. Then, the 10 dimes become worth more than
a dollar but only as silver, not as coins. Consequently, they become very poor
coins aa they tend not to circulate at all.
Under present circumstances, it is clearly preferable to eliminate the coinage
■demand for silver entirely rather than to reduce it. All of the available silver
should be mustered to stabilize the market price until the new coinage aystem
is fully operative. Unless this price line is held at least that long, we will be
without coins until the new type is in adequate supply.
It is natural that this committee will hear arguments favoring retention of at
least some silver in coins. These arguments have little economic validity.
Keference is made to "sound" currency. Our convenience coins are sound if they
are convenient. The soundneaa and value of the dollar have nothing to do witn
whether we make our small change out of silver, copper, nickel, or plastic.
Intrinsic value has nothing to do with the problem. In the first place, nothing
has intrinsic value. Value in the result of supply and demand. Reduce the
demand for, or increase the supply of, gold, silver, or peanuts and their value
will decline. Actually the leas so-called intrinsic value a coin has, the better.
It costs society less to make, and it is less likely to be used other than as a coin
The market price of the metal in a coin is irrelevant; four quarters were a dollar
-when silver has cost the Treasury 50 cents, 71 cents, or 92 cents. We certainly
-do not want full-bodied coins, as they are the most troublesome, as is in fact
illustrated now by the silver dollar which has disappeared, and the fractional
-coins which are tnreatened by the same fate.
As to the arguments for retaining some silver, other than appeals for intrinsic
value, the only ones appear to be tradition and prestige. Under existing cir-
^lunstances, I see no persuasion in either. The tradition of using silver as a coin
in the United States started when silver was used as standard money and was
fostered by discoveries of silver many years ago that made it a fairly economical
material. Certainly the tradition of using copper must be at least as respectable,
dating also from the Mint Act of 1792. As for prestige, I wonder in whose eyes
Digitized byGoOgle
112 COINAGE ACT OF 1966
the United States of Amerioa gains prestige by using e. half dollar that is 40 percent
silver. I see more prestige stemming from the advanced technology that has
created the sandwich coin and that releases silver for more urgent uses.
May I conclude by referring briefly to some well-known facts about silver.
First, silver mining is a minor industry indeed, producing only S45 million worth —
at historically high prices — in the United States annually in recent years. Mexico
and Peru both produce more. Annual output of asparagus, cabbage, and celery
each exceed domestic output of silver. The silver- producing industry has un-
doubtedly received more favorable attention from Congress, from 1702 to IdS4,
Ser dollar of output and per employee than any other industry. Second, only
lur mines in the United States derive their principal income from silver. Most
silver is obtained in conjunction with or as a byproduct of other ores. And
against consumption of 326 million ounces in the United States in 1964, production
was 38 million ouncer^, about 11 percent. Third, it follows that high prices of
silver benefit mainly foreign producers at the expense of American consumers of
photographic supplies, tableware, jewelry, and dental material and as taxpayers
paying for the coinage system and for electronic devices. Fourth, it also follows
that the price of silver has little effect on output. In spite of the market price
rising to $1.29, American output was 37 million ounces in 1960 and either 35 or
36 million in each subsequent year. Since 1934 the price has risen SO percent,
but annual production is still the same because it is largely tied to output of
copper, lead, and zinc. Fifth, and last, silver is just another commodity. It has
no inherent, intrinsic claim to be coined any more than does copper or nickel or
anything else unless it is the most economical commodity for that use. In today's
world, it is more true than ever that silver is too valuable in other uses to be wasted
in coins, where other materials are now clearly more economical.
The Chairman. Now, you say the rest of the gentlemen will file
tiheir statenients?
Mr. Stevens. Mr, Chairman, I think I erred a bit in that. Ail of
the individuals here, with one exception, represent the Silver Users
Association, and I cannot speak for Mr, Morris, who does not sit here
as a representative of the Silver Users,
The Chairman. Yes, sir.
Mr, Morris, you have a statement too?
Mr. Morris. Yes.
STATEMENT OF JOSEPH T. HOSRIS, HANAGINQ DIRECTOR,
NATIONAI ASSOCIATION OF PHOTOGRAPHIC UANTTFACTURERS,
INC.
Mr. Morris, Mr. Chairman, I would like to make a statement,
excerpting from both a summaiy and written statement,
I would also like to ask in the interest of conserving this committee's
time that this brochure entitled "Photography and the Economy" be
included in the record. It has been distributed to the members of the
committee.
The Chairman, Yea; I have looked at it. It contains interesting
information, we will insert it in the appendix. Without objection,
it is so ordered.
Now, Mr. Morris, you may present your statement, sir,
Mr. Morris. Thank you, Mr. Chairman, members of the com-
mittee — my name is Joseph T. Morris. I am managing director
of the National Association of Photographic Manufacturers, Inc.,
New York, N,Y., a voluntarv association composed of approximately
80 U.S. companies engaged in the manufacture of photographic film
and papers, cameras, projectors, and other equipment and photo-
graphic chemicals. Its members account for over 90 percent of these
products manufactured in the United States, dollar and volume
■dbyGOOgIC
COINAOE ACT OF 1965 113
The U.S. photographic manufacturing industry is the lai^est in-
dustrial user of silver in the world. We, therefore, greatly appreciate
ttiis opportunity to express our views on the proposed legislation,
H.R. 8746, presently being considered by this distinguished committee.
The photographic industry is entirely dependent upon systems for
image reproduction that utilize silver-based salts. There are no
satisfactory alternates or substitutes for silver in the photographic
process and, despite extensive research, there are no technological
changes to nonsilver systems anticipated.
There has been extensive research aimed at the development of
substitutes for silver-based salts. This research has been accelerated
within the past few years in part as a direct result of the substantial
increase in the cost of silver which has occurred since 1961. Silver
represents a considerable portion of the cost of sensitized photographic
products. Yet, despite an increase in silver prices of over 40 percent
in the past 4 years, no acceptable substitute system has been devised
and none is foreseeable.
To date any material discovered is subject to severe limitations and
would at best be suitable for extremely limited applications.
As the photographic industry has grown, its needs for silver has
increased from 30.8 million ounces in 1959 to 40.3 million ounces in
1964. It IS expected that this demand will continue to increase as
the industry continues to expand within the economy.
Because of its extensive use of sUver, the photographic industry
has developed an awareness of tlie need for silver recovery, both as a
conservation measure and as a measure of prudent business economy.
Those companies in the industry engaged in the manufacture of
photographic films and papers recover the maximum amount of
silver possible from waste and scrap materials. Silver is also re-
coverable from the solutions used in the development process for
photographic films and papers. During processing, a varymg amount
of silver is "washed" from the film or paper and remains in the solu-
tion. The extraction of this silver from photographic chemicals is
practiced by many companies in the industry. Since this recovery
requires an investment in capital equipment, labor, and overiiead,
the economy of silver recovery in the process operation is dependent
upon the volume of film processed and many other factors.
The members of the association and of the photographic industry
have a direct and continuing interest in insuring that the supply of
silver available for this use is maintained. They, therefore, nave a
further direct interest in any proposed legislation that attempts to
deal with the present critical deficit situation existing between free
world silver production and consumption.
The proposed legislation under consideration by this committe&
provides for the elimination of silver in U.S. dimes and quarters.
We enthusiastically support this portion of the proposed bill.
The members of the association are unalterably opposed to that
portion of the proposed legislation that would provide for the con-
tinued use of silver in U.S. half dollars, even on a reduced silver-
content basis.
In 1964 the free world deficit between silver consumption and
production excluding alll coinage demand was 70.4 million ounces.
Any continued use of silver in U.S. subsidiary coinage can only increase
this deficit and reduce the total amount of silver available for private
Digitized byGoOgle
114 COINAGE ACT OF 1»Q5
industry where its use is vital to the continued growth of the econ-
Fresideut JobnsoDj in his message to the Congress of June 3, 1066,
accompanying the proposed legislation, states the following:
In terms of the present pattern of coin usage, adoption of the new coinage
will permit a saving of some 00 percent of tlie silver we are now putting into
coins annually.
This would indicate a contemplated continuing demand for over 30
million ounces of silver to be used in half dollars based on the 30(V
miUion-ounce estimate for present consumption elsewhere stated
in his message. The continued use of 30 million ounces of silvtf
in coinage represents an almost 50-percent increase in the 1964 io;-
dustrial arts freeworld deficit of consumption over production.
Otherwise stated, this continued unnecessary demand for silver iB
half dollars represents approximately 75 percent of the silver used
by the entire U.S. photographic industry last year, based on the
consumption reported in the Treasury study.
We appreciate this opportunity to appear before this distinguished
committee and present our view^ on a legislative proposal which has
such far-range maphcationa for our industry and for our Nation as
a whole. Thank you.
The Chairman. Thank you, sir.
(The complete statement of Mr. Morris follows:)
My name is Joseph T. Morris. I am managing director of the National Aeeooia-
tion of Photographic Manufacturers, Inc., New Yorlc, N.Y., a voluotary aaaocli^
tion composed oi approximately SO U.S. companies engaged in the manufacture
of photograpliic film and papers, cameras, projectors, and other equipment and
photographic chemicals. Its members account for over 90 percent cnF theee
products manufactured in the United States, dollarwise and volumewise.
The U.S. photographic manufacturing industry is the largest industrial uaer
of silver in the world. We, therefore, greatly appreciate Ods opportunity to
eTcpress our views on the proposed legislation, H.R. 874S, presently being con-
sidered by this distinguished committee.
In 1964 the U.S. photographic manufacturing Industry's usage of stiver was
estimated at 40.3 million ounces.'
The photographic industry is entirely dmiendent upon systems for Image
reproduction that utilize silver-based salts. There are no satisfactory alternates
or substitutes for silver in the photographic process and, despite ertensive research,
there are no technological changes anticipated to nonsilver systems.
The members of the association and of the photographic industry have a direct
and continuing interest in insuring that the supply of silver available for this UM
is maintained. They, therefore, have a further direct interest in any proposed
legislation that attempts to deal with the present critical deficit situation existing
between free world silver production and consumption.
The proposed legislation under consideration by this committee provides for
the elimination of silver in U.S. dimes and quarters. We enthusiastically support
this portion of the proposed bill.
The mcmberfi of the association :ire unalterably opposed to that portion of the
proposed legislation that would provide for the continued use of silver in U.S.
half dollars, even on a reduced silver- content basis.
In 1964 the free world deficit between silver consumption and production,
excluding all coinage demand was 70.4 million ounces.' Any continued use W
silver in U.S. subsidiary coinage can only increase this deficit and reduce the total
■dbyGOOgIC
COINAGB ACT OF 1965 115
amount of silver available for private iaduetry where its use ia vital to the con'
tinued growth of the economy.
Preslaent Johnson, iahtemesaagetotheCongresaof JuneS, 1965, accompanyinK
the proposed legialatioc, states the following: In terms of the present pattern (rf
coin usage, adoption of the new coinage will permit a saving of some 90 percent of
the silver we are now putting into coins annually." This would indicate a con-
templated continuing demand for over 30 million ounces of silver to be used in half
dollars based on the 3D0-milhon-ounce estimate for present consumption elsewhera
stated in bis message. The continued use of 30 million ounces of silver in coinage
represents an almost 50-percent increase in the 1964 industrial-arts free world
deficit of consumption over production. Otherwise stated, this continued un-
necessay demand for silver in half dollars represents approximately 75 percent
of the silver used by the entire U.S. photographic industry last year, based on the
consumption reported in the Treasury study.
Photography is a basic industry in the Nation's economy.
Photography dependent wpon eHver avaQab&ily
The entire photographic process depends upon the unique ability of a silver salt
to record an image when exposed to light. Photographic film and paper reproduce
an image because they have been coated with a lightr^ensitive silver salt. No
other material has been discovered that can produce the quality of image and con-
tinuous tones that make a photograph come alive.
There has been extensive research aimed at the development of substitutes for
sOver-based salts. This research has been accelerated within the past few years in
part as a direct result of the substantial increase in the cost of silver which ha&
occurred since 1961. Silver represents a considerable portion of the cost of sen-
sitized photographic products. Yet, despite an increase in silver prices of over 40
percent in the past 4 years, no acceptable substitute system has been devised and
none is foreseeable.
To date any material discovered is subject to severe limitations and would at
beet be suitable for extremely limited applications.
As the photographic industry has grown, its need for silver has increased from
30.8 million ounces in 1969 to 40.3 million ounces in 1964.' It is expected that this
demand will continue to increase as the industry continues to expand within
the economy.
Because of its extensive use of silver, the photographic industry has developed
an awareness of the need for silver recovery, both as a oonservation measure and
as a measure of prudent business economy. Those companies in the industry
engaged in the manufacture of photographic films and papers recover the maximum
amouDt of silver possible from waste and scrap materials. Silver is also recover-
able from the solutions used in the development process for photographic films
and papers. During processing, a varying amount of silver is "washed" from
the mm or paper and remiuns in the solution. The extraction of this silver from
photographic solutions is practiced by many companies in the industry. Since
this recovery requires an investment in capital equipment, labor, and overhead,
the economy of silver recovery in the process operation is dependent upon the
volume of film processed and many other factors.
Our industry is concerned over the existing deficit between free-world industrial
consumption and free-world silver production. Because silver is indispensable
to the photographic process, we are vitally interested in the conservation of exist-
ing silver stocks to forestall the time when the lack of available silver at any
prioe could cause a serious eurtailcoent in the manufacture of our industry a
products.
If silver sup^es are curtailed, vital uses of film h
for example, it is indispensaUe in aerial reconnaissaL._,
greatly increased costs to the Government and taxpayer.
Since the Government is the largest purchaser of sensitized photographic
material, the burden would be sutetantial. Medical, dental, and scientific
research would continue to require film. Banks and other commercial and in-
dustrial users where photography is necessary for recordkeeping, product analysis,
and research would have a continuing need. Newspapers, magazines, and other
periodicals where graptiic arts represents the lifeblood would l>e supplied, but all
would face mounting prices and reduced supply. Many amateur photographers
faced with increased costs would cut back their photographic expenditures or
possibly be forced to turn to other interests.
'Tablof. Treaaor; Stafl Stud; of Silver Eiad Coinage. U.S. Treasury Department.
db,Google
116 COINAGE ACT OF 1965
Tht effect of the proposed legislation
The proposed legialution under consideration by thia committee is 8 recognition
in part of the continuing need of private industry tor silver underscored by the
Btsteraent of the President in his message to the Cfongress on June 3, 1965, accom-
pftnying the proposed biil in which he stated, "The one part of the demand for
Biiver that can oe reduced ia Governmental demand for use in coinage."
The elimination of silver in dimes and quarters as proposed, represents a
realistic partial solution to the excessive demand placed upon Treasury stocks of
silver by the continued use of silver in our subsidiary coinage and furthermore, a
recognition that sutisidiary coinage need not have "intrinsic value" to maintain
purcnasing power,
Silver has become too valuable to the industrial needs of our economy to be
continued in any subsidiary coinage. Our members and our industry, therefore,
are opposed to that portion of the proposed bill which would provide for the
ret«ntion of ft reduced amount of silver m U.S. half dollars. The continued use
of silver in half dollars will impose an unnecessary and unwarranted burden upon
Treasury stocks detracting from their availability to aid in tilling the industrial
dcRcit and assisting in the orderly transition to nonsilvcr subsidiary coinage.
Inevitabljf, these stocks will become depleted oeceasitating a second change in the
composition of the U.S. half dollars. The Battelle Memorial Institute Btud7
indicates that this might occur in the 1970's.
Assistant Secretary of the Treasury Wallace in testimony before a subcommittee
of the Committee on Appropriations, U.S. House of Representatives on May 24,
IWiS, indicated in discussing the subsidiary coin ahortaKe that "the shortage of
half dollars continues to be very severe." The testimony which folUowed indicates
that the Treasury attributes this shortage to the fact that the Kennedy half
dollar has become a collector's item. The minting of thia coin with a reduced
silver content— with an ultimate realization that a further change to nonsilver
composition is inevitable, can have only one result, to further decrease the circu-
lation of this coin.
President Johnson, in his message to the Congress of June 3, 1965, accompanying
the proposed legislation, states the following; "In terms of the present pattran
of coin usage, adoption of the new coinage will permit a saving of some 90 percent
of the silver we are now putting into coins annually." This would indicate a con-
templated continuing demand for over 30 million ounces of silver to be used In
halt dollars based on the 300-million-ounce estimate tor present consumption
elsewhere stated in his message. The continued use of 30 million ounces of silver
in coinage represents an almost 50'percent increase in the 1964 industrial luis
free-world deficit of consumption over production. Otherwise stated, this con-
tinued unnecessary demand for silver in half dollars represents approximately
76 percent of the silver used by the entire U.S. photographic industry last year
based on the consumption reported in the Treasury study.
Photography in the economy
The photographic industry employs approximately 300,000 persons in the
United States. There are over 200,000 retail outlets which sell over S2V5 billion
of photographic products at consumer purchase value. In 1963, 530 photo-
graphic manufacturing establishments had shipments of over Sl.S billion at
manufacturers prices. In 1964 exports of photographic goods amounted to S180
million against imports of $110 million, a significant contribution to the U,3.
balance-of-payments situation.
Approsimately two-thirds of the sales by the U.S. photographic manufacturing
industry are to Government, industry, aisd commercial users. To this large
segment of the economy, the continued use of photography is vital. In national
defense where it is used for aerial reconnaissance and X-ray examination of our
weapons systems, to the health of our citizens where half a billion medical and
dental X-rays last year contributed significantly to the health of our population, to
the printing and publishing industries where photography pictoriaily tells a story
and, in addition, is finding increasing usage as a modem production technique.
To education where 340,000 still and movie projectors are in iise in the U.S.
pubhc schools, and to science and industry wiiere it performs a wide variety of
tanks ranging from data storage to use in oil e^tploratjon.
Photography also provides recreation for some 52 million American pictun
takers as well as through motion pictures.
■dbyGOOgIC
COINAGE ACT OF 1B65 117
COKCLTJBION
We appreciate this opportunity to appear before this distinguished committee
and present our viewe on a legislative proposal which has such far-range implica-
tions for our induatry and for our Nation sm a whole.
We reapeetfuUy urge the committee to report the proposed legislation so as to
provide for the complete elimination of 8[lver in our Nation's subsidiary coinage
and simultaneously to insure to the maximum extent possible the continued avait-
ability of silver to meet the growing needs of the conomy.
(The statements of Mr. Francis H. Wemple, and Mr. Geoi^e R.
Fninkovich follow:)
Stateuent of Francis H. Wbhpld, Treasurer of Handt & Haruan
I am Francis H. Wemple, treasurer of Handy & Harman, a New York corpo-
ration founded 98 years ago in 1867. Our executive offices are at 850 Third
Avenue, New York, N. Y., I'.nd we have plunts in Fairfield, Conn.; Mount Vernon,
N.Y.; Providence, R.I.; Chicago, 111.; El Monte, Calif.; Norristown, Pa.; and
Toronto, Ontario, Canada. In addition, we have sales offices in other major cities
both in the United States and Canada, and an important volume of our producte
is sold through distributors who have hundreds of branches all over the country,
Amoo); other activities, we are one of the world's largest processors and refiners
of silver for industry. We are manufacturers, not bullion dealers in the sense of
merely buying and selling silver in the form of commercial bars. We produce a
wide ranze of silver products made from alloys and compositioos which are used
in virtually all lines of industry throughout the United States and Canada. We
also buy scrap materials containing silver for our own use or for return to our
■customers.
Handy & Harman endorses those provisions of H.R. 8746 which deal with the
minting of quarters and dimes without silver. We strongly oppose section 1(a)(1)
falling for a ht^f dollar containing silver and section 7 establishing a mandatory
Treasury purchase price of $1.25 an ounce for newly mioed domestic silver.
We oppose the proposed silver half dollar on the grounds that in our opinion
there is a shortage of silver for industrial purposes alone which should not be
aggravated by the retention of any silver in our subsidiary coinage system. The
existence of this shortage and the reasons for it are clearly stated in the President's
message of June 3, and are in fact given as the primary reasons for recommending
the ehmination of silver from the quarter and the dime. In my opinion the same
considerations with respect to the elimination of silver from the quarter and the
dime apply equtdly to the half dollar.
We oppose the establishment of a mandatory Treasury buying price for newly
mined domestic silver because we believe that it is thoroughly unjustified and is a
complete reversal of the Government's silver policy clearly established in Publio
Law 8S-3G passed just 2 years ago.
The continued availability of silver at reasonable prices is vital to the industry
which my company and others like us serve. It is a common minunderstanding
to think of jewelry and silverware as the largest users of silver. In fact President
Johnson in his June 3 message listed these categories first in discussing private
demand for silver. Actually these uses account for only about 20 percent of total
industrial demand in the United States. The largest single industrial use is
photography, and this involves not just snapshots but also X-ray film, industrial
photography, as well as defense photography. In the cunsumer products group
silver is used in all household appliances, in automobiles, in radios, in television
sets, and in telephones to name just a few. The mirror industry is also a very
large user. Heavy industry relies on silver for motors and generators, aircraft,
atomic reactor control rods, agricultural machinery, switches and controls,
electronic data processing equipment, and a host of other products. Silver is
used in dentistry, as silver amalgam for fillings, and for medical compounds. It
is used in X-ray tubes and equipment and in surgical and medical appliances. In
the defense industry it is essentia] for submarine and torpedo batteries, marine
plumbing, rockets and missiles, supersonic aircraft, and radar. In most of these
areas no substitute for silver exists. It is essential to support our economy as we
know it. The President himself states that coinage is the one part of demand for
silver that can be reduced. I go further and maintain that coinage is the one
part of demand for silver that can and should be eliminated.
Everyone is familiar with the fact that demand for silver, particularly for
coinage in the United States, has grown very rapidly during the past few years.
Digitized byGoOgle
118 CXJINAQE ACT OP 1965
Attached to this statement are two charts, one Bhowing the widening gap betweeoi
demand and new production and the other showing the rising price trend for
diver over the past several years. I am aJeo attaching a copy of Handy & Har-
man's Review of the Silver Market for 1964 which describes in detail hiBtarieal-
developments in the silver market. AH of these t>ackgroiind facts were brought
out in the President's coinage message. (The review referred to above may be
found in the appendix.)
In considering the merits of a silver half doUar we must estimate futm* demimd
and supplies of silver. To do this I am making some basic asaumptiMiB. These '
1. That production in the free world will increase over the neJtt 5 years by
a cumulative total of approximately 35 percent. I arrive at this figure by studying
the most optimistic estimate of the American Mining Congress. It may prove
to be unrealistic. It is based on the assumption that higher prices will bring
about substantially higher production. This la not necessarily true. Production
in the United States in 1964 was just about the same as it was in I960, in spite of
a price increase of about 40 percent. Sunshine Mine, for example, reported'
production in 1964 of 2,700,000 ounces compared to an average production for
the past 5 years of over 3 million ounces.
2. That industrial consumption in the free world will increase by about 26
percent over the next 5 years. This is slightly less than the increase over the past
5 years and may be understated.
3. That coinage demand will decrease sharply due to the proposed new coinage
for the United States and less usage outside the United States. For the United:
Stat^ I am using a figure of 30 million ounces based on the assumption in President
Johnson's message that the proposed change would reduce the current annual:
usage of 300 million ounces by 90 percent. I am assuming further that all other
countries combined will not be using more than another 30 million ounces, even-
though they used over 60 million ounces last year.
Using these assumptions we can project by 1970 world industrial demand at
about 360 million ounces and coinage demand at about 60 milhon ounces. New
production would be about 290 million ounces, leaving a worldwide deficit of some-
ISO million ounces. Secondary sources cannot even optimistically be expected'
to supply more than 50 million ounces, so this would mean that b years from now
there would be an annual deficit of some 80 million ounces.
Let's examine the Treasury stock situation by 1970. According to the Presi-
dent's message the new coins will not go into circulation until sometime in 1966.
Therefore we may assume that mid-1966 may be the time. Treasury stocks now"
amount to about 1 billion ounces. At the present rate of use they will be down-
to about 580 miHioti ounces by the middle of next year. After deducting the
proposed stockpile of 135 million ounces, there would be less than 450 miUicm
ounces left, which at the present rate of redemptions as well as projected use for
half dollars would be gone before 1970. In order to get silver for the new half
dollar the Treasury would then have to rely on silver obtain^ from getting our
present coin back out of the hands of the public, or it would have to go to tha
marketplace to buy it.
There is a lot of silver outstanding in the form of existing coins, but, as I under-
stand the administration's proposal, these coins will have to continue circulating,
alongside the new coins for some time. Furthermore, how fast they can be with-
drawn in the future is unpredictable. If the Treasury tried to buy 30 million
ounces a year in a market where supplies were already short, unquestionably
substantially higher prices would result with consequent serious damage to many,
many industries.
We conclude that the proposed silver half doUar will only intensify the existing,
silver shortage. It will not stay in circulation because it will be even more of a
curiosity and collectors' piece that the present half dollar which disappeared aa
fast as it has been minted. It will assuredly have to be changed again in tlm
future, and this can only cause further disruptions and inconvenience. We
conclude further that the same silver shortage which dictates the removal of
silver from our subsidiary coins, including the half dollar, makes completely
illogical the establishment of a Treasury buying price for newly mined domeatio
silver at $1.25 an ounce.
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COINAQE ACT OF 1966
119
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COINAGE ACT OF 1965
My name is George R. Frankovich. I am the executive director of the Manu-
facturing Jewelers A SilversinitiiB of America, Inc., the principal trade association
of the manufacturing jewelry and silverware industry in this country. This
association has about 500 manufacturers of jewelry, silverware, and allied prod-
ucts in ils membership, including suppliers to manufacturing plants.
Silver ia an important metal to our meraberehip. Half of our finished goods
manufacturers use silver. Several dozen members are totally dependent ou silver
aa a raw material. Their productiS include men'a and women's jewelry, religious
articles, school and college rings, identiii cation bracelets, and tableware. Most
of these manufacturers are sm^l, with little capability to diversify their produc-
tion, their markets, or their raw material ref|uirement.
These silver-using manufacturers are just emerging from the chaotic silver
g-ice increases of several years ago that made shambles of their pricing structure,
articularly hard hit were those whose product prices were frozen for long periods;
for example, those selling on long-term contracts and through catalogs. These
past few years have demonstrated the necessity of obtaining some assurance of'
stabi.iiy in the price of their raw material. They are prepared to assume the
normal risks of a free commodity market, but they do not consider justified the
competition from Government for the use ot silver in coins or the continued
adverse inliuenee by Government on supply and price.
In jewelry alone, there are about 1,200 persons whose livelihood depends on
silver. Silverware accounts for about 13,000 additional jobs. Historically, rs
well fts prieewise, silver products occupy a unique niche in the market. Most
alver jeweliy selb more because it is silver than because it is jewelry. If silver
were to become uneconomic to obtain, a gap would appear in the jewelry and
tableware markets and much of this gap would never be filled by products of
other mi'.teriiils. While some persons may be unsympathetic to the uses or
silver in products of this type, the thousands of jobs silver makes possible In
our industry are vitally important to those who earn their living with this metal.
Vit d to our economy, too, are the businesses and communities whose welfare
is closely linked to silver.
Obviously, we agree with the simple logic that silver be eliminated in dimes
and quarters because of the silver shortage and increasing coinage requirements.
But to make half dollars of 40 percent silver content under these circumsbinces
simply does not make economic or monetary sense. Such action darkens even
further the serious silver supply outlook.
Projections of stockpile requirement, coinage for the rest of 1965, and con-
tinued redemption of silver certificates at the present rate would shrink our-
silver stocks to about 400 million ounces by the end of this year.
Increased silver production falls short of the increasing industrial demand.
So even without silver in hiilf dollars, a continuing free-world deficit of 75 million
ounces would sop up a 400-million-ounce reserve in afcwut .'i years.
That certainly is a dark outlook. But coinage of half dollars of 40-percent
silver would shorten the life of even that small reserve fay 1 or 2 years, depending
on whether Secretary Fowler's low estimate is used or whether we assume the
more realistic 1964 production figures for half dollars.
An additional year or two ot silver price stability makes a big difference to the
consumer and to the manufacturer of silver products. More important, however,
ia the seemingly permanent competition from the mint for scarce silver stocks,
which is inevitable if the bill in its present form is enacted.
The arguments for silver in the half dollar are tortuous at best. Our "prestige" '
money is the American dollar and it shall continue to be so long as we maintain
its prestige. As long as people accept 2 half dollars, or 4 quarters, or 10 dimes for
this dollar, wc have good coins, regardless of the material from which they are
made. It the Treasury doubts that 4 quarters or 10 dimes of a nonsilver material
will continue to be change for a dollar, H.R. 8746 may fail to ease our coinage
problem. If it believes, however, as do we, that the nonsilver quarter and dime
will keep their acceptable positions as subsidiary coins, then it can only follow
that so would a nonmlver half dollar.
We urge that this committee amend the present bill to provide half dollars of
non-silver-bearing material.
The Chairman. We will now give the members an opportunity to-
ask questions. Mr. Miilter?
■dbyGOOgIC
COINAGE ACT OF 1969 123
coXlectors and people who are not collectors in the true sense will
ha-'ve a tendency to hold ooto coins that have as much as 90 percent
ffllyer in them, and you will find retired from circulation every silver
coin, I just wondered if that would not be true.
-Admiral Ramsey, would you hke to comment on that?
-Admiral Ramsey. Mr. Stephens, that has been one of the bones of
contention, if I may put it that way, between the silver-using industry
and the silver-producing industry, as to which action will cause the
coins to disappear the fastest.
Well, we do not think what you have in mind will happen for this
reason.
There is a speculative interest in silver coins existing today in
anticipation of a price rise in silver which would make the sUver
Coins more valuable for their metal content than the face value.
We feel that this speculative interest has been kept up by un-
certainty and the propnecies that the price of silver would rise.
We feel that if silver is eliminated from coins altogether, and this
speculative interest is eliminated, that people will not be inclined to
hoard silver coins when they might spend them, and they might use
them for more useful purposes than holding them in speculation,
"Waiting for the price to rise.
Now, we do reel that there will be some increase m collecting or
hoarding or whatever you want to call it. There is bound to be.
There is to be a change in our coinage system, and some people will
say "Well, these coins are not going to be minted any more, perhaps
we had better empty our pockets every night and put them in a box."
This is to be expected.
But the people who are holding, as one of the members I think
yesterday said, he had knowledge of someone who is holding IK tons
ot silver coins in anticipation ofa price rise, he would no longer con-
tinue to hold these coins if he did not think he was going to make a
profit.
Therefore we think that the elimination of silver will tend to bring
coins back into circidation, because the speculative interest is gone.
Mr. Stephens. Would that speculative interest be part of the
reason that the Kennedy half dollars have not been in general
circulation?
Admiral Ramsey. Well, air, the Kennedy half dollar is in effect a
commemorative coin, and I do not think you can include it in the
speculative area. The Kennedy half dollar is a commemorative
Coin, in effect, and it is being kept by people for that reason and not
for a speculative interest in the hopes that they will get more money
for the 50-cent piece.
Mr, Stephens. That is all that I would like to ask. Thank you for
the information.
The Chairman'. Mr. Gonzalez?
Mr. Gonzalez. Mr. Chairman, I would like to address the same
questions I asked the Treasury officials yesterday to any or all of
these gentlemen here this mormng, and that is how do you feel about
the revival of the transaction tax and the end-use certificate?
Now, the transaction tax we repealed in 1963. Although I did
net know as much then as I do now, and I do not claim to know too
much now, I did have doubts then. And it seems to me that the
congressional intention being what it was when the transaction tax
Digitized byGoOgle
122 COINAGE ACT OF 1965
Mr. Johnson. Thank you, Mr. Chairman.
Apparently what we are really discussing here this morning is the
question of whether we will ehminate the 50-cent piece from the
legislation and put it in the same category as other coins.
I am interested in the statement this morning by Mr. Strauss, and
I want to direct this to any member of the panel, in which he says
"we believe the lesson of history is clear that currency systems based
exclusively on fiat money are in the long run doomed to drastic
devaluation,"
Do you think that it will be a dangerous thing for the coinage of
this country and to our monetary system if we also destroy the silver
content in our SO-cent piece and just have all coins just token coins?
Do you believe that statement? That is a pretty strong statement
by Mr, Strauss — ^warning of a monetary disaster if we resort to
nothing but token coins.
Would you care to answer it, Mr. Stevens?
Admiral Ramsey. I think Dr. Welfling would be the one to answer
that question.
Mr. Wblflino. Excuse me, I thought you were addressing a ques-
tion to Mr. Strauss.
Mr. Johnson. No; I was quoting Mr. Strauss and addressing my
question to your puiel.
Mr. Wblfling. I am sorry.
No; I would disagree completely.
As I said in my statement, it could not matter less what token coins
are made out of. In fact, the name "token coin" explains the aitu»-
tion. They are tokens. As such my position would be they ^tould
be made as economically as possible.
What the token coins are made of has nothing whatever to do with
the so-called soundness of the dollar or the level of the price level.
Mr. Johnson. Thank you.
That is all, Mr. Chairman.
The Chairman. Mr. Brock?
Mr. Brock. Will the gentleman yield?
Just following that thought furthers Doctor, would you then take
the position that the dollar itself should have no reserves behind it?
Mr. Wblfling. As a quick answer, I could not quite take that
position; no. I would explain my answer this way: The vt^e of the
dollar, meaning the height of the price level, is determined largely
by the volume of dollars. How many of those dollars the pm>hc
wants to carry around in fractional form is purely a matter of coo-
venience, once the total quantity of dollars has been fixed by monetary
policy.
Mr. Bhock. I agree completely insofar as the coinage is concerned.
I was just wondering about your economic philosophy in general
insofar as the gold backing is concerned.
Mr. Wblfling. I would nave to say how the supply of dollars is
limited is less important than the fact that it is limited, whether it
is limited by gold reserves or some other method.
The Chairman. Mr. Stephens?
Mr. Stbphbns. I would like to ask anybody on the panel that
might feel he would like to volunteer an opinion on thk. It seems
to me when we take the silver out of all the coins, as you have pro-
posed, including the major portion out of the 50-cent piece, too, that
Digitized byGoOgle
COINAGE ACT OF 19fl5 123
collectors and people who are not collectors in the true sense will
have a tendency to hold onto coins that have as much as 90 percent
silver in them, and you will find retired from circulation every silver
coin. I just wondered if that wouJd not be true.
Admiral Ramsey, would you like to comment on that?
Admu-al Ramsey. Mr. Stephens, that has been one of the bones of
contention, if I may put it that way, between the silver-using industry
and the silver-producing industry, as to which action will cause the
coins to disappear the fastest.
Well, we do not think what you have in mind will happen for this
reason.
There is a speculative interest in silver coins existing today in
anticipation of a price rise in silver which would make the silver
coins more valuable for their metal content than the face value.
We feel that this speculative interest has been kept up by un-
certainty and the prophecies that the price of sUver would rise.
We feel that if silver is eliminated from coins altogether, and this
speculative interest is eliminated, that people will not be inclined to
hoard sUver coins when they might spend them, and they might use
them for more useful purposes than holding them in speculation,
waiting for the price to rise.
Now, we do feel that there will be some increase in collecting or
hoarding or whatever you want to call it. There b bound to be.
There is to be a change in our coinage system, and some people will
say "Well, these coins are not going to be minted any more, perhaps
we had better empty our pockets every night and put them in a box."
This is to be expected.
But the people who are holding, as one of the members I think
yesterday said, he had knowledge of someone who is holding 1% tons
of silver coins in anticipation of a price rise, he would no longer con-
tinue to hold these coins if he did not think he was going to make a
profit.
Therefore we think that the elimination of silver will tend to bring
coins back into circulation, because the speculative interest is gone.
Mr. Stephens. Would that speculative interest be part of the
reason that the Kennedy half dollars have not been in general
circulation?
Admiral Ramsey. Well, sir, the Kennedy half dollar is in effect a
commemorative coin, and I do not think you can include it in the
speculative area. The Kennedy half doUar is a commemorative
coin, in effect, and it is being kept by people for that reason and not
for a speculative interest in the hopes that they will get more money
for the 50-cent piece.
Mr. Stephens. That is all that I would like to ask. Thank you for
the information.
The Chairman. Mr. Gonzalez?
Mr. Gonzalez. Mr. Chairman, I would like to address the same
questions I asked the Treasury officials yesterday to any or all of
tnese gentlemen here this morning, and that is how do you feel about
the revival of the transaction tax and the end-use certificate?
Now, the transaction tax we repealed in 1963. Although I did
not know as much then as I do now, and I do not claim to know too
much now, I did have doubts then. And it seems to me that the
congressional intention being what it was when the transaction tax
48-93S— ss ft
Digitized byGoOglC
124 COINAGE ACT OF 196S
was instituted and having served its purpose well during that period
when it was important, it would seem now it would be more in order
during this transition that will occur when and if we go into the
new coint^e.
Do you favor the restoration or revival of these two legislative
measures as a concomitant matter of policy to be adopted by the
Congress if this new coinage law is so passed?
Xu*. Wemple. Mr. Gonzalez, my name is Wemple, and I am
treasurer of Handy & Harman — maybe I can ta,ke a crack at that
question.
First, the transaction tax. This tax originally was conceived 30
years ago when our entire tax structure was much different than it is
today and was designed to tax and penalize speculation in silver on
a rather severe basis. However, it never brou§;ht in any revenue of
any large amount, and my recollection is that it may have initially,
but it certainly did not over the great life of the tax.
It largely proved to be a restrictive affair which prevented the
silver markets in the United States from developing to the extent
that they might otherwise have developed.
We would ne opposed to any revival of the transaction tax^ — ^and
perhaps I should emphasize that the whole question of the need for it
m our opinion would not arise if silver were completely eliminated from
the U.S. coinage, because the U.S. Govenmient would thereby soon
not have any need for such control.
Now, as for the end-use certiffcate, I would say on that, speaking
from the point of view of Handy & Harman, that if in the judgment
of the Treasury Department an end-use certificate type of approach
to control the use of existing silver supplies were considered necessary,
we certainly would abide by them.
Mr. Gonzalez. I am very interested in hearing that, because in
your booklet you point out very emphatically and dramatically that
since lend-lease the United States has turned out to be an exporter
of silver.
Mr. Wemple. That is right, yes — last year they were a large
exporter of silver,
Mr. Gonzalez. I believe that — I have another question which
might be pertinent in your case.
Do you have any knowledge of any kind of industrial speculation
through inventoryaccumulation?
Mr. Wemple. We estimated at the end of 1964 that somewhere in
the order of 70 million ounces on a woridwide basis were outstanding,
either in the form of speculative holdings or in excess inventories
accumulated as a hedge against a future shortage of supply, or a future
sharp price increase.
I would guess at this point that little if any of these holdings have
been liquidated up to now. My guess at this point would be that that
substantially represents the amount at this time.
Mr. Gonzalez. So perhaps some revival of the transaction tax —
maybe not as severe as the one we repealed — but some modified
form would be very much in point of order to be discussed by the
Congress.
Now, after all, the thing that I am really worried about is the
transition period, which I think that if we do not take measures in
anticipation of speculation, of runs through excessive redemption of
Digitized byGoOgle
COINAGE ACT OF 1963 125
the outstftnding silver certificates, and related problems that could
arise, that then this can very well turn out to end in chaos instead of
bemg a help.
We won't solve the silver problem; we won't solve the coinage
problem,
I think this is the only real worry that I personally feel as a member
of this committee.
Therefore, these two measures, which I thought had proved to be
pretty effective, at least dining the period of tune that they served
their main functicm, as anticipated by Congress when it adopted
them — that perhaps now would be the time to consider this seriously.
If there is industrial accumulation here with inventories that could
create a problem, then we should seriously consider restoring the end-
use certificate, because at least it would be a measure of controlling
the domestic problem.
I don't know what we can do about the international speculation.
But I think there is quite a bit we can do about the domestic specula-
tion.
Mr. Wemplb. I think on that point, the reintroduction of the end-
use certificate, which as I said before we certain^ would abide by —
we have to recognize that the silver markets of the world have inter-
play with each other, and it is very difficult to isolate one from
another. If we had an end-use certificate system, such as we had
under the 1946 act, then it would end up the domestic industry which
was eligible would use Treasury stocks, much as they did in 1960 and
1961, and foreign industry, which was not eligible, or foreign buyers
who are not eligible would simply divert the other supplies which
normally would be coming into this market. It is what we saw
happen, Mr. Gonzalez, back in 1960 and 1961— that the flow of
silver, the traditional flow of silver to this market was diverted to
foreign markets. And I think we would see much the same thing
happen again.
Mr. Gonzalez. Thank you. I have been advised that my time
has expired.
The Chairuan. Mr. Stanton?
Mr. Stanton. I have no questions, Mr. Chairman.
The Chairman. Mr. Weltner?
Mr. Weltner. No questions.
The Chairman, Mr. Hanna?
Mr, Hanna. Mr, Chairman, there is just one point I want to make —
an observation first.
I do not conceive of the impact of silver in the coins being the same
in our society as it was in the Roman Empire. For one thing, they
bad no concept of equity or use that was developed in this country.
We have a whole generation of people who probably never have
owned an automobile, hut they don't care because they are using one
all their life.
I just want to get at the one point, and that is what effect on the
price or the support price would the use of silver in the htjf dollar
nave, if any?
Mr. Welfling, perhaps you should answer this. You have indicated
there is 123 million ounces used in the United States a year for indus-
trial purposes, that 203 million ounces have been used for coinage.
Now we are goii^ to knock off the 203 million oimc«s usage if we do
Digitized byGoOglC
126 COLVAQE ACT OF 1965
not put any silver in any coins. Now, what is that going to do to the
price of silver, or the support of the price of silver?
Mr. Welplinq. I think the first question is how much silver would
be used in the 50-cent piece.
Mr, Hanna, That is not my question. My question is, What is
going to happen to the price of silver? That is my question.
Mr. Welflinq. In the near future?
Mr. Hanna. Yes. Assume that we are not going to use any silver
in any coinage whatsoever next year. Now, what is going to be the
price of silver?
Mr. Welflinq. The pressure on the price is upward, and the only
thing that holds it down is the Treasury stop, which is available
through redemption of silver certificates. So as long as that stock
lasts, the price cannot rise ahove SI. 29.
Mr. Hanna. Is your answer that it is not going to have any effect
on the price of silver — because I don't understand
Mr. Welflinq. Yes.
Mr. Hanna. Is the lack of the use of silver in coinage would to
affect the price of silver?
Mr. Welfling, No; not for the foreseeable future.
Mr. Hanna. Now I will ask the same question of Mr. Strauss.
Mr. Strauss. If no silver at all is used in comage, I would agree
with Dr. Welfling that the immediate efEect would be that the price
would remain at $1.29. 1 think the longnm effect is that it might
remain at $1,29 somewhat longer than it would if some silver were
being used in coin^e.
From the standpomt of the effect on price in a commodity that is
free of any restraint, and at the moment the only restraint on silver,
as Dr. Welfling properljr pointed out, was the redemption of the silver
certificates — once that is gone, it is total demand versus total supply —
whatever the nature of the demand, whatever the nature of the supply.
So if you are restricting the total demand by completely eliminating
coinage, of course it does have a dampening effect. But that is not
to say it will push the price of silver down at this time because, as
has been brought out in the statistics, even without any coinage use
at the present time there is a deficit in the world supply of silver,
I would like to say that we are talking now really in kmgrun price
movements.
The immediate effect of the President's recommendation and the
knowledge that this committee was debating this bill was to unsettle
the speculators. And I do not quite agree with what Mr. Wemple
said in response to Coi^ressman Gonzalez' question. The fact is
that some of the speculative stocks that were accumulated last year
are being drawn on now, not in the United States, but outside the
United States, The price of silver in London, which had been at a
premium over our price to the extent of the cost of freight — in other
words, the British price was controlled by our $1.29 price, plus what it
costs to get silver to England. On Friday the price m England
dropped to our price here minus the cost of getting silver to the
United States. In other words, as the British looked at it — well,
they could sell it at $1.29 in the United States, hut it costs them a
cent and a half to get it to the United States. So the British price
dropped to $1,278,
The reason for that is that the people who had bought silver in
London primarily as a hedge against devaluation of sterling, inci-
DigitizcdbyGoOgle
COINAGB ACT OP 1985 127
dentally, rather than as a speculation on silver per se, figures with the
high bank rate there — they have to pay 6 or 7 percent on their money—
they figured tiiat the measures before this committee were going to
insure that the price of silver in the near future was not going to
rise— therefore wny continue to carry silver and pay 6 percent interest
per year. They are dumping their stocks. That is what is tempo-
rarily depressing the market.
But I think this is going to be a sort of a 9-day wonder. I do not
think the price weakness will persist over there. I think the com-
mittee should be aware of the fact that it has occurred.
Mr. Hanna. Thank you.
Thank you, Mr. Chairman.
The Chairman. Mr, Mize?
Mr. Mize. Thank you, Mr. Chairman,
Mr. Strauss and Mr. Hardy, we import both copper and nickel,
and now we are going to start using copper and nickel in our coins.
Do you anticipate any upward pressure on the price of nickel and
copper?
Mr. Strauss. Mr. Mize, I am going to take exception to your
statement. We do import most of our nickel. But our domestic
copper mine production is about 1.2 million tons a year as against a
totEiI domestic requirement of about 1.5 million tons. So we do not
import most of our copper. Most of our copper is mined in this
country.
No, I do not believe that converting to the use of copper and nickel
for coinage is going to put any pressure on the price of either of those
commodities, for the reason that the mint has made it clear and the
stockpile authorities have made it clear that the mint's requirements
will be met for the time being, at any rate, by drawing down surplus
copper and nickel already owned by the Government. So I do not
believe this will affect the market price of either metal.
Mr. Mize. Thank you.
Thank you, Mr. Chairman.
The Chairman, Mr, Grabowski?
Mr. Grabowski. Admiral Ramsey, on page 7 of your statement you
state that you feel that a ceihng should be spelled out by the Secre-
tary of the Treasury in item 6 of our bifi stating that not only should
the Treasury be authorized but directed to sell silver at a fixed price of
$1.29. I assume this is important to the silver users. Why is that so?
Admiral Ramsey. Yes, sir, we feel that it would be important. It
is unclear at the moment — just exactly what is intended by these
buying and seUing provisions. The selling provision in the present
law protects the coinage. The Treasury has to sell sUver to keep the
market price at $1.29 because of coinage. The selling provision was
not for the benefit of the silver-using industry.
We have to bear in mind that the $1.29 price for silver today is a
result of the redemption of silver certificates, which is another matter
entirely.
Now, in case the Treasury has silver and is not redeeming silver
certificates, for whatever reason, in that situation the Treasury would
have to sell silver to keep the price at $1,29 as long as it has to protect
the coinage. Consequently, this provision, whidi has been inserted
in this bill, to provide a floor of $1.25 we feel should be compensated
for by a ceiling spelled out just as this is spelled out for the floor.
And that is my point.
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128 COINAQE ACT OF 19e£
But I think it is very important to remember that the Treasury does
not set the market price m the terms of "fixing it" as has been so
commonly stated. The price is determined by the redemption rate,
and not by any deliberate action on the part of the TVeasmy. And
the redemption is done through the obligation of the U.S. Government
to redeem silver certificates in silver.
Mr. Grabowski. Thank you.
The Chairman. Mr. White?
Mr, White. Thank you, Mr. Chainnan.
First of all I would like to ask Dr. Welfling a question.
In his statement he very definitely indicated that there is no need
for intrinsic value in subsidiary coinage.
Do you believe there is a need for 25-percent gold backing of our
present Federal Reserve notes?
Mr. Welflinq. I think that is only one way of
Mr. White. I asked the question — do you believe there is a need
for the backing of 25 percent m gold behind our Federal Reserve notes?
Mr. Welfling. I take it you would prefer a yes or no answer.
Mr, White. Yes, sir; I would.
Mr. Welexinq. No.
Mr, White. You do not feel there is.
Mr. Welfling. No, air.
Mr. White. Mr. Martin, when he testified before our committee,
felt this was necessary. The President of the United States has indi-
cated it was necessary. You disagree with both Mr. Martin and the
President of the United States.
Mr. Welfling. If you want a yes or no answer that I disagree, yes.
Mr. White. I will ask you another question, Doctor. That ques-
tion is with respect to the circulation of the new coinage along withi
the proposed coinage.
Do you believe that the present 90-percent silver coins can stay in
circidation with the cupronickel bonded layered coin?
Mr. Welfling. Did you say the present 50-cent piece?
Mr. White, The present 90 percent silver coinage,
Mr. Welfling. I doubt it — but not because they are difiFerent;
solely because the present 50-cent piece, it is so close to its redemption
value.
Mr. White. That is the difference between $1.38 and $1.29.
Mr. Welfling. That ia right.
Mr. White. About 9 cents difference in monetary value.
Mr. Welfling. Right.
Mr, White. Isn't it a fact the intrinsic vtdue has something to do
with it? You are basing your opinion on intrinsic value; are ^ou not?
Mr. Welfling. That is precisely my objection to corns with
intrinsic value.
Mr. White. I ask the question again. Will the two coins stay in
circulation side by side?
Mr. Welfling, That depends upon the extent of the market price.
Mr. White. You heard testimony here today. Doctor, that we are
going to continue to maintain the price of silver at $1.29 by the sale
of silver stocks as long aa we have silver available from our stocks at
West Point.
Mr. Welfling. Right.
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COINAaB ACT OF 1965 129
Mr. White. Therefore, the price is going to continue at $1.29 as
long as the Treasury will redeem silver certilcates. Now, under that
condition will the two coins stay in circulation side by side?
Mr. Welfling. Not so long as that volume of silver that is in the
50-cent piece threatens to go above that market price in the near
future.
Mr. White. Does it not threaten to go above it at the time that
we no longer have the stocks in silver at West Point.
Mr. Welfling. Yes. The next block will be $1.38.
Mr. White. Then what would you aaticipate to be the fate of our
present 90-p6rcent silver coin^e?
Mr. Welfling. It is a gamble
Mr. White. I am asking you to prognosticate a little.
Mr. Welfling. That was about what I was to do, sir. I think it
is a gamble whether the Treasury can hold that price. I think the
odds are in favor that it will be able to. But I also think it should
have every break.
Mr. White. I agree with you that we are going to have to have
coinage, and this is my primary objective; to continue a coinage that
will be acceptable to the American public and do the business it is
In (Jie event that the price of silver exceeds the monetary value that
we now have in our subsidiary coinage, then you would agree that
that coinage would very definitely be m jeopardy, as has been stated
here several times.
Mr. Welfling. Yes.
Mr. White. All right. Then you also agree, that at the end of the
time period when we no longer have the silver for sale, that that coin-
age will probably disappear, the 90-percent coinage, either by with-
drawing by banks in the Federal Reserve System or people melting
it down and putting it into some other form.
Mr. Welfling. If the price exceeds the $1.38 that would happen.
Mr. White. Do you think at the time we get to the ultimate dis-
posal of our stocks the price will exceed $1.38?
Mr. Welfling. That, of course, is prognosticating, as you said.
If I had a bet, I would bet on the Treasury to win this. But it is not
a sure bet.
Mr. White. I don't quite imderstand what vou mean by win.
Mr. Welfling. I think the Treasury will be able to maintain the
market price of silver until it has an adequate supply of the new
coinage.
Mr. White. I wonder about the available stock of 2 billion ounces
that now exist in our subsidiary coinage — if we longer have stocks of
silver, this coinage will disappear, will it not?
Mr. Welfling. Yes, I understand your question. I did not say
it would disappear. I said it would if the price reached $1.38. And
I think
Mr. White. I think we had better get back to a simple answer,
yes or no.
Do you beheve the price will reach $1.38 after the Treasury stocks
are depleted?
Mr. Welfling. After they are depleted, yes, if they are depleted.
Mr. White. At their present rate of consumption they are bound
to be depleted, are they not, sir?
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130 COINAGE ACT OP 1965
Mr. Welfling. That is why I say it is a gamble. At the present
rate they should last 2 years. But then you are betting on the
present rate.
Mr. White. How lon^ has Great Britain been attempting to recall
their subsidiary sUver com^e?
Mr. Welfling. I didn't know they were attempting to recall it,
Mr. White. They were attempting for some period of time.
Mr. Welfling. They went to another coin in 1946.
Mr. White. Even before that they reduced the silver content.
Mr. Welfling. Yes.
Mr. White. For 40 years. And they have only been able to get 80
percent of it in that 40 years. So we are talking about a recovery of
silver — it would be very difficult in our present subsidiary coinage,
A^ain we are talking about the possibility of protecting our subsidiary
comage.
Well, I have some other questions I would like to ask you but I
have been informed that my time has expired.
I thank the chairman very much.
The Chairman. Mr. Widnall?
Mr. Widnall. Thank you, Mr. Chairman.
Dr. Welfling, on page 5 of your statement you say:
How much of the silver that we have today, that we are using today,
is actually tied to production of copper, lead, and zinc — what per-
centage?
Mr. Welfling. I am sure Mr. Strauss can give you a better answer
My recollection is that it is either 20 or 30 percent.
Mr. Strauss. About two-thirds of the production at the present
time is tied to the production of base metals. About one-third is from
mines that are valuable chiefly for their silver,
Mr. Widnall. How much of the increase in production of silver is
attributed to copper, lead, and zinc, and how much to actual silver
mining?
Mr. Strauss. Well, in the United States production has not in-
creased particularly. This has been due primarily to the fact that
the copper, lead, and zinc industry, as it has expanded, is treating
more and more ores that do not carry any silver at all.
As far as the stra^ht silver mines are concerned, as I said before
they have not had economic incentives, because while their price is
up 80 percent, the prices of commodities and the inflationary effect
on the cost of doing business has been considerably more than 80 per-
cent. So actually the economic position of the silver-mining industry
today is not as good as it was in 1935 when all this started.
Mr. Widnall. What known sources of silver are not being worked
today because of price, that could be worked — any material number?
Mr. Hardy. Undoubtedly there is much silver that is not being
brought from the ground today because of economic conditions. I
would like to call your attention to the fact that 100 years ago the
|>rice of silver was $1.29 and a deposit that had 12 or 15 ounces of
silver to the ton in those days was a relative bonanza, because the
coat of mining was only about $4 or $5 a ton.
■dbyGOOgIC
COINAGE ACT OP 1965 131
Today when you have costs of mining five and six times that and
still a price of $1,29 you can see that a deposit of 12 to 15 ounces per
ton is not going to be operated.
There are many of those on the North American Continent, which
is the primary home of silver, and the general locus lies between the
summit of the Rocky Mountains and the summit of the coast range,
from the Yukon territory down through British Colimihia, the United
States, into Mexico, through Central America, and on into South
America, where of course the Andes is the governing feature.
Mr. WiDNALL. If the price of silver operated freely do you think
it would be— it could be materially— the production could be ma-
terially increased without a Government subsidy?
Mr. Hahdy. If the thing were exactly on a free market, where it
was only the forces of consumption that were in the market, as to
what would set the price of it, in accordance with what was produced,
I am sure that the silver would come from the ground.
To say there is no more silver to be found and produced is completely
wrong. There is plenty of it. As in the cases I quoted, uranium and
copper — one might even look back at tungsten during the Korean war.
It will come forth in answer to a call of price.
Mr. WiDNALL. Well, the point I am getting at is if you had a free
market in silver and the price was absolutely free, would that produc-
tion come without the request for Government incentives to produce?
Mr. Hahdy. Oh, certainly; very much so.
Mr. Strauss. May I add something to that?
Congressman Widnall, I am not sure that you are aware of the fact
that our committee has estimated a substantial increase in production
that is in the making right now and that does not call for any kind of
Government subsidv or assistance. We are not looking for subsidy,
Mr. WiDNALL, That is all; thank you.
The Chaihman. Yes, Now we have all asked questions, I beheve,
and it is up to the wishes of the committee as to further proceedings.
The only time we could have additional hearings would be Friday or
Monday. Mr. Todd?
Mr. Todd. No questions.
The Chairman. Mr. Gettys?
Mr. Gettys. Mr. Chairman, if the remaining members of the
committee have no questions, I will foi^o my questions.
The Chairman. Let us consider then whetner or not we should
Eass on this bill and the amendments between now and 12 o'clock or
ave another session on Friday,
Mr. Multer called to my attention a very important point.
Any member desiring to ask questions may do so in writing and
we wdl ask you gentlemen, if it is directed to any one of you, to
supply the answer when you examine your transcript of the testimony.
Wifl that be satisfactory, gentlemen?
That will be fine.
And the record will be printed and available before the bill comes
up on the floor of the House.
Mr. Brock. Mr. Chairman, I understand there is an entirely
new draft of the bill to be submitted in executive session. In addi-
tion there are going to be amendments offered. I intend to offer
at least one and probably two. I am quite sure that Mr. White
will have some to offer.
Digitized byGoOgle
132 COINAGE ACT OF 1965
It seems to me that we are taking a pretty heavy burden to pass
on l^islation of this importance in this short a period of time.
The Chairman. If we don't get through by 12, we will just go over,
Mr. Brock. It is perfectly all right with me. I don't think we
need to rush with something like this. We ought to take time if
necessary.
Mr. White. Mr. Chainnan
The Chairman. Mr. Annunzio?
Mr. Annunzio. Mr. Chairman, I ask permission that these state-
ments from the International Jewelry Workers' Union be included
and made part of the record.
The Chairman. Without objection, so ordered.
(The material referred to follows:)
Chicago, III., May 28, 1965.
Hon. Frank Anntjnzio,
Home of Representatives,
House Office Building, Washington, D.C.
L ' - -
Of o , , . „ „
of Bilver from the minting of subsidiary coinage and redemption or retirement
of silver certifioates at eonveraion rate of $1.29 per ounce. Tliia ia of vital concern
to many of our members employed in Chicago if the price of what is regarded as
a luxury item is driven too nigh. Loss of sales must result — followed by loss of
employment to our members.
Your sympathetic interest in our problem wiU be deeply appreciated.
WiLLiAU F. Lennon,
President, Local 4-
International Jewelry WoEKERa' Union
New York, N.Y.
Statement
The International Jewelry Workers' Union, AFL-CIO, which has thousands of
members throughout the United States, ur^es that Congress take immediate
measures to halt the use of silver in U.S. subsidiary coinage (dimes, quarters, and
half dollars) as there is not enough silver being produced to satisfy either the needs
for coinage, or the demands of industry. It is essential that supplies of this
precious metal be conserved for use in industry where it has no substitute.
The U.S. Mint Is expected to use 312 million ounces of silver this year to mmt
dimes, quaters, and half dollars. This ia 40 percent greater than the entire free
world production estimated for 1965, and more than 2% times the amount needed
by American industry. The U.S. Treasury's stocks are being depleted at an
alarming rate to meet this deficit in supply.
Unless action is initiated immediately, to stop this senseless drain on Aroerica's
silver resources, the U.S. Treasury's supplies of silver will vanish in less than 3
J ears. Every day, the situation is further aggravated. The International
ewelry Workers' Union is vitally concerned with this matter, for the Jewelry and
silverware industry is the third largest consumer of silver in the country and, if
Treasury supplies of silver are permitted to disappear, the jobs of many hun-
dreds — perhaps even thousands — of our members will be in serious jeopardy.
The price of silver in our industry is exceedingly important, since it accounts
for as much as 75 percent of manufacturing costs in some of our major product
categories. We, therefore, strongly oppose any action that might result in an
increase in the price of silver. The retention of any amount of silver in coinage,
or the failure of the U.S. Government to continue its present legal obligation to
redeem silver certificates, would result in increased prices.
Since 1952, we have seen the price of silver bullion increase by 62 percent.
Unit sales of silverware have declined in almost direct proportion, with correspond-
ing loss of jobs.
Serious unemployment would result from any additional increase in the price of
silver. There would be hardships caused to our members and their families, and
the blow would be especially heavy in those communities in which the jewelry
and silverware industries represent a major economic factor.
Digitized byGoOgle
COINAGE ACT OF 1905 133
Because of the imperative nature of the situation, we urge that:
(1) IiegiBlatian be enacted immediately, providing for the elimination of silver
in the manufacture of subsidiary coins; and
(2) The U.S. Treasury continue to make it« silver available to domestic industry,
through redemption or retirement of silver certificates at the current conversion
rate of $1.29 per ounce.
Eabbt Spodick,
Generoi president and geTieral teerelary-trea«UTer.
The Chairman. Mr. White?
Mr. White. Mr. Chairman, I believe you are aware that the Sub-
committee on Mines and Mining of the Interior Committee, is holding
some hearings with respect to silver production and consumption. 1
hope these hearings — which are to be concluded today — will be made
available to the members before we take action on this bill.
The Chaibuan. They will be made available. It is customary and
traditional.
Mr. White. I would like to make the request that they be made
available to us before we take final action.
The Chaikman. It is not traditional to have the printed hearings
before the committee votes. That has never been known to my
knowledge. But now it is understood that we will have the hearin|n9
printed and available to the Members of the House before the bill
comes to the floor of the House.
Mr. White. Mr. Chairman, I would again like to point out that
the Treasury Department has taken over 2 years to consider this
I^slation. Their report is 4 months late. It would seem to me
that to try and push this through in 50 minutes would be a little
inappropriate at this time.
The Chairman, Well, suppose we go into executive session, if it is
satisfactory with the members, and then we will decide what we shall
do.
Mr. Brock. Before we do, Mr. Chairman, I would like to ask
another question.
The Chairman. You mean of the witnesses?
Mr. Bhock. Yes, sir.
The Chairman. Certainly. You may proceed, sir.
Mr. Brock. Gentlemen, some of you have expressed rather strong
concern over the availability of silver in the future.
What would be your reaction to the possibihty of requiring in this
bill that all new coins, the reduced value coins be printed with the
date of 1965, and all silver content coins have a date of 1964 so that if
sometime in the future we are faced with a national emergen<y and
we needed to get these coins back into the hands of the Treasury,
to get the silver content, we would have a method of finding out — we
would have a method of encouraging people to turn the coins in.
Is this a feasible approach?
Admiral Ramsey. I think that is a tough question to answer.
But I would say this: It is astimated variously that there are from
1.2 to 1.4 billion ounces of silver in outstanding subsidiary coins at
the present time, which we feel in a national emei^ency could be called
in and used for whatever purposes it might be needed.
Now, that is the only way I can answer your question.
I do not quite follow what you are trying to do otherwise.
Mr. Brock. I am tjyin^ to differentiate just on the matter of dates
so it would be easily identifiable.
■dbyGOOgIC
134 COESTAGE ACT OP 1968
Admiral Ramsey. I don't think it is going to make much difference
whether it is 1964 or 1965. If we need silver coins and we need silver
and we are going to call tliem in, if the Government is going to national-
ize coins, I don't think it would make much difference what the date ia.
Mr. Brock. Except some people are not as aware of these coina as
you and I migjit be and might not know the difference.
Admiral Ramsey. I see what you mean. In other words you are
talking about the 50-cent reduced content coin.
Mr. Brock. That is true. I am also talking about the cupronickel
coin. We have been told they are so good you can hardly tell the
difference.
Admiral Ramsey, I don't think I can get into that one, Mr.
Brock. The best thing I could say is I think we could differentiate
the coins if you had to call them in. I think the Government would
have no trouble in getting in the silver coins witli the high content
silver. It might be an interesting situation, but I think they can
do it.
The Chairman. Shall we have an executive session now?
Without objection, so ordered.
(The followmg statements and correspondence were submitted for
inclusion in the record:)
Mr. Chairman, my name is Craig Hoamer, Representative from the 32d District'
California. I appear before you to point out wliat I believe to be three serious
defects in H.R. 8746.
Despite statements in tlie President's message to Congress on Jmie 3, 1965,
relative to the coinage proposal and the statements to your committee by Henry
H. Fowler, Secretary of the Treasury, it is ray considered opinion that GreshaTO*B
law has not been repealed. I believe it is inevitable that the new coins of nominal
intrinsic value cannot for long circulate alongside existing silver coins without
driving the latter into hoarding and out of circulation. The record of many
governments who have attempted to outlaw melting down coins, exporting them,
and imposing other restrictions regarding them has consistently been character--
ized by failure.
To obviate the operation of Gresham's law, I suggest that the legislation include
discretionary authority for the Secretary of the lYeasury to substitute for a frac-
tion of the metals that the bill authorizes for use in the new coins another metal
of specified isotopic content. Tins will enable the Secretary of the Treasury to
establish a metallic value for the substitute metal equivalent to that of the silver
in existing coins and thereby put the old coina and the new coins on parity. In
order to accomplish this, of course, the Secretary of the Treasury must have author-
ity to purchase quantities of the substitute metal when it is offered at the mint.
It is apparent that the physical process of minting new coins will not keep up
with the demand despite the pious hopes expressed by some witne^es to your
committee. This alone or taken in conjunction with the operation of Gresham's
law threatens to create a massive coin shortage in this country, disturbing the
public convenience and necessity in its fractional dollar transactions. Therefore,
the bill should contain discretionary authority for the Secretary of the Treasury
to print and issue fractional paper currency which can to an extent alleviate the
prophesied inconvenience.
It is my own estimate that the cost of producing the new coins will not exceed
20-percent of their face value on the average. This is a very generous estimate and
the likely fact is that the cost of production will bo considerably less. Taking the
20 percent figure, however, for the purposes of illustration, it is pointed out that at
the present time there are approximately 12,394 milUoa coins in present circulation
having a face value of $2,230,100,000. At the 20-percent sciKniorage figure,
rMjlacement of this coinage in circulation should accrue a profit of about $1,780,-
Offl),000 to the 'Treasury. Additionally, at the present rate of annual replacement
of coins and additions to the supply, over $350 million a year of face value must be
Digitized byGoOgle
COINAaE ACT OP 1968 135
coined and issued. The TreaBury's 80-peroent profit on these should amount to
some £280 miltion annually. Furthermore, ehould the Treasury be able to re-
capture ail existing subsidiary coinage, itB mlver content, if sold, could represent
another $2 billion, or so, profit to the Treasury.
It appears to me that these profits should not be squandered by sublimation into
a mass of Treasury etatistice. Rather they should be applied against the national
debt monthly aa they accrue. It ia my strong recommendation that provision to
such effect be included in H.R. 8746.
I hope that the committee takes favorable action upon these recommendations.
If it does not do so, I intend to offer amendments to the bill implementing tliem
when it reaches the House floor.
Mr. Chairman, distinguished members of the committee, I am Thomas B.
Hungerford, executive director of the National Automatic Merchandising Asso-
ciation, with headquarters in Chicago, 111.
We are the national trade association of the merchandise and service vending
industry. Our more than 1,400 member firms include all 3 segments of our
business: Companies which own and operate vending machines, firms which
manufacture the machines, and companies which supply vendible products and
services to the operators of machines.
The purpose oi my testimony is to give wholehearted support to the President's
message proposing the new coins and, specifically, to Senate bill 2080 which has
beea introduced also as House bill 8746.
In supporting this legislation, I spealc in behalf of our own members, as well aa
several aUied associations which represent other coin-operated types of businesses.
These include coin-op laundries, music naachincs, and soft drink bottles.
The vending industry considers the President's proposal for new coinage a
most imaginative and practical solution to the problem of dwindling silver reserves.
All Americans have a stake in the various aspects of the silver shortage. Our
industry has, from the beginning, gone on record for a solution which will put the
public interest above other considerations. For the sake of brevity, I wUl refer
only to the specific involvement of coin-operated equipment services.
Ever since World War II, vending services have become increasingly impor-
tant to the American consumer. The American public now puts 30 billion coins
into merchandising vending maciiines alone,- every year. Our machines will sell
more than $3.5 billion worth of goods m 1965. By 1970 this important part of
our retailing economy is expected to rise above $5.5 billion in sales per year.
What this means to the average citizen, however, can be better illustrated in
another way: More tlian 1,500,000 Americana now obtain at least 1 meal every
day from vending machines where they work. Our customers include the employ-
ees in thousands of factories, hospitals, and offices. Colleges and other institu-
tions depend on vending service for meals, and especially for snacks and coffee
breaks. For example, in 32 different plants of the Radio Corp of America naore
than 60,000 employees are served every day through vending machines, I can
give you an example still closer to home. Even employees at the White House,
here m Washington, use a vending installation for snack and refresliment service.
Vending is important not only to millions of customers but also to hmidreds
of product manufacturers. For example, every fourth nickel and dime candy
bar now comes from a vending machine. So do 20 percent of allaway-from-home
soft drink sales and more than 3 billion cups of coffee per year.
Since I began speaking to you — about 3 minutes ago — the American pubho
has put 174,000 coins into our machines. On an annual basis this amounts to
over 30 billion coins.
It can easily be seen that unless these coins work properly, irritation and
widespread complaints would result.
Coins are the lifeblood of our business. And the heart of each vending machine
is the coin mechanism which decides whether the coin is genuine and whether
the machine should therefore dispense the product or service.
It might be interesting to note that until the first of these sophisticated mech-
anisms was invented in the 1930's, the vending industry was literally "slugged"
out of business. Only with the invention of the so-called "eddy current slug
rejector did we gain the ability to tell good coins from bad coins.
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136 COINAGE ACT OF 1965
These com mechaniBms first check the coin for size and thickness. But the
key test checka the metallic content of the coin. It so happens that our testing
mechaaisma were deeigned for the present sUver coins.
If I ma^, I would like to demonstrate just how this works.
Only coins with similar density and uectrical resistivity to our present silver
coins will pass this test. Ail other coins, and counterfeits, are rejected.
If the new coins to be adopted by the Consress have a different metallic re-
action, they will be rejected just like "slugs.* Public confusion, and even in-
dignation, would surely result. Conceivably, consumers would, so to speak,
blame our Government for minting "bad" coins.
More than half of the 12 miUion coin-operated units of all types use the metalUo-
content test which I have just described. It would take at least 3 years to design
and produce new meohaniams in order to equip all of these uoita, if "noncom-
patible" coins are adopted. And it would coat our industry more than SlOO
million to change over. This does not count hundreds of millions of dollars in
loss of sales during the changeover.
Obviously this would be a serious problem to our industry, as well as to the
The new dimes, quarters, and half dollars proposed by the President in the
legislation now before you will work reliably in our existing equipment without
any change. The important thing is that the public will be able to uae the pro-
posed coins in our machines side by side with the present silver coins without any
trouble.
The coins proposed by the President will be an ideal solution for our millions of
customers, and also for the more than 6,000 companies which own and operate
merohandiae vending machines. This is aiso true for the other coin-operated
businesses of which I spoke.
It should be understood that a satisfactory half dollar is crucial to the musio
machine industry and to the coin-operated laundry businesses especially. But this
coin, also has increasing importance for merchandise vending, because cigarette
prices are approaching the 50-oent mark and many new types of merchtuidise
which we now sell will require the half-dollar coin in the future.
Our industry strongly backs the President's proposal for the new coins and
urges the Congress to vote its approval.
We are grateful to the committee for this opportunity to offer testimony.
The future of luncheon facilities and refreshment breaks for millions of factory
employees and college students is up for a vote by the U.S. Congress in the nert
few weeks, when it decides what to put in place of the present silver content of our
dimes, quarters, and half dollars.
Serious disruption of vital services and considerable economic dislocation will
result unless the Congress provides for new coins which will work satisfactorily in
food and beverage machines which serve thousands of factories, offices, colleges,
hospitals, service stations, and many other locations.
Included in the congreseional decision will be the fate of 12,200 million cups of
coffee, milk, and soft drinks and of 4,500 mOlion candy bars. These are just a
fraction of the numerous goods which poured forth last year as Americans plunked
more than 30 billion coins into merchandise vending machines of all types.
With more than 83 million coins used in merchandiae venders alone every 24
hours, a wrong decision could bring irritation and angry words from the millions
of American consumers who buy everything from clean laundry to hamburgers,
kleenex, postage stamps, telephone calls, ice, dance music, and photostats at the
drop of a coin.
The metallic content of our coins directlj
anisms which test whether a coin ia acceptei
operated machines.
Since the mechanisms check the metallic properties of t
magnetic field, only coins which react like present silver nr
All other coins, and slugs, are rejected. According to " „ _,
oians, the fate of S3. 5 billion in annual sales of vended products depends on
whether Congress votes the right kind of aubstitute coins.
Coins with leas ailver and coins b^d on a modern clad process bonding two
different metals into a three-layer sandwich would be the ideal solution, because
they work like present coins, will be accepted interchangeably until present silver
coins go out of circulation in a few years.
Digitized byGoOgle
COINAGE ACT OF 1966 137
Clad metal is the modem process which is widely used in automobiles, refriger-
ators, and many other iudustrial and consumer goods. It is easy and economical
to mint and, therefore, guarantees as ample coin supply for the growing U.S.
economy.
Since these new coins could be minted with a smaller amount of silver, and even
without any silver content at all, they provide the ideal answer to the growing
shortage in the Government's silver reserve.
With more Americans relying on coin-operated services every year, coins which
work in present equipment are crucial to the vending industry.
Growing at an average of almost 10 percent every year since the 1950'8 the
American vending industry will sell more than $3.5 billion in goods this year.
One out of four nickel and dime candy bars sold, one out of five soft drinks
consumed away from home, and nearly 3 billion cups of cotlee were bought by the
American consumer from vending machines last year.
Coins are also the open sesame for 1,200,000 telephones, 228,000 laundry, dryer
and dry-cleaning machines, 470,000 music machines (plus 1,410,000 separate wall
boxes), 650,000 amusement machines and kiddle ridea, 250,000 wall coin changers
and 33,000 postage stamp machines, of which 8,000 are operated by the U.S.
Government.
By far the greatest advance of vended services has come in factories, colleges,
and hospitals. More than 1,500,000 American workers and students rely on
vended food service for at least one meal each day.
Martin O'Shaughnessy, administrator of food services for Radio Corp. o(
America, Camden, N.J., says RCA depends heavily on vended services for its
employees.
''In several of our major manufacturing plants vending services are the OTily
medium to provide food to our employees. Even in all of our other plants,
where conventional food service is used, vending represents about 50 percent of
our employees' daOy food purchases."
He adds that 32 RCA plants utilize vending machines, serving some 60,000
of the company's 80,000 employees.
Whether the Congress adopts coins which will work in present coin equipment
is also of crucial importance to the more than 6,000 firms which own and service
vending machines as a full-time business.
More than 4,000 of these companies are small independent businesses with
six or fewer employees. Only a tuindful of large companies employ thousands
of servicemen on a national msis.
To the smaUer firms, especially, an adverse decision by the Congress would
mean extinction, because even if they could finance the high expense of changing
their coin mechanisms, they would not be able to survive the loss of sales imtil
new coin mechanisms become available. (Production time has been estimated at
3 years, if a complete ch«igeover should become necessary.)
Thus, while the plink of coins into vending machines goes on at the rate of
more than 58,000 every minute, the industry holds its breath, hoping that 535
Senators and Congressmen will vote for happy consumers and a^inst out of
order signs.
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138 COINAGE ACT OF 1965
Facts and Fiodrks
about the uerchahdi8e vendiho indubtbt
Value of goods sold through machines in 1964 {estimated) $3, 500, 000, 000
Number of machines on location 4, 500, 000
Vending machines with coin mechanisms using the "eddy cur-
rent" principle 3,300,000
Number of coins inserted in vending machines:
Hourly .._ 3,483,183
DaUy 83,596,383
Annually 30,512,680,000
Number of Americans who obtain at least 1 meal daily from
vending machines (estimated) 1, 500, ODD
Vending employment:
Number of vending operating companies (1964) 6, 200
Number employed directly 80,000
Suppliers' employees furnishing products to the vending
mdustry _ 300,000
Total vending industry annual payroll ' $600,000,000
ABOUT OTHER COIN-OFGRATED BUSIN ESSES
Number of coin telephones in use _ __ 1,200,000
Number of wall-type coin changers (used in coin-op laundries,
with phone booths, etc.) 250,000
Number of music machines on location (1963) 470,000
Gross sales through music machines (1963) -.. $419, 000,000
Number of coin-op laundry stores 35, 000
Includes:
770,000 washing machines, 250,000 dryers (annual sales) . . . $500, 000, 000
60,000 drycleamng units, annual sales (in 8,000 of the 35,000
stores) $200,000,000
'Over.
Note.— All ^mes are for IftM unU^ Indicated othervrbe.
Retail sales though merchandise vending machines in 1964 totaled $3,494
million. At the present rate of growth, vending machine sales in 1970 will he
$5,250 million.
Nurnb^ of coin-operated machines tieing "eddy-eurrent" coin meekaniam*
19M
1970'
600.000
2S0.0C0
UG,fiOO
R600
60.000
eacoo
25.000
>tooo
2,400
tas?
Coin cliangers (wall type)
310. nno
IS
6,»4a,4<»
8,110,800
>i9e6.
Thb American Bankers Association,
New York, N.Y., June 7, 1965.
Hon. Wright Patman,
Cha,irman, Banking and Currency Committee,
House of Representatives, Washington, D.C.
Dear Mr. Chairman : The American Bankers Association supports the changes
in our coinage system as recommended to the Congress by President Johnson in
bis message of June 3, 1965, and urges enactment ^ H.R. 8746, a bill to provide
Digitized byGoOgle
COINAGE ACT OF 1865 139
for the coinage of the United States, which is now under consideration by the
House Banking and Currency Committee. I expressed the association's support
in a statement released to the press on June 3, 1965, a copy of which is attached.
The shortage of coins in circulation has been acute at times during tlie past
few years and has caused serious problems to banliing institutions in meeting the
business needs of their customers. During the April IS6S meeting of the executive
council of the association the situation at that time was discussed by the Federal
agency relations. Federal legislative, and economic policy committees of the
association. Following this meeting the administrative committee of ABA
further re\iewed the matter and adopted a resolution on April 19, 1965, recom-
mending the eUmination of silver from U.S. subsidiary coins, etc. I am attaching
a copy of this resolution, also.
We will be glad if you will include our views in the record of your hearings oa
H.R. 8746.
Very truly yours,
Reno Odun, President.
Washington, D.C, June 3. — Reno Odlin, president of the American Bankers
Association, today expressed the ABA's support of changes in our coinage system
as recommended to the Congress by Presiaent Johnson.
Mr, Odlin, who is chairman, the Puget Sound Nations.! Bank, Tacoma, Wash.,
also commended the Treasury Department for its detailed study which formed
the basis for the President's proposals, and gave assurance that the ABA would
do its utmost to assure a smooth transition to the new system.
The text of Mr. Odhn's statement follows:
"The American Bankers Association is in full accord with the recommendations
made by President Johnson with respect to changes in our coinage system. The
association's administrative committee reviewed this problem on April 19, 1965,
and agreed that continued use of silver in subsidiary coins had reached critical
proportions and recommended that some action be taken to change our subsidiary
coinage while the Treasury atUl possesses substantial amounts of silver that can
be supplied to the market through redemption of silver certificates.
"The ABA is very much aware of the impact which these coinage proposals
may have on the American public. We subscribe to the President's beli^ that
there should be no untoward concern about the change to composite coins, and
we will also urge all of our 14,000 member banks to make clear to their depositors
that the purchasing power of the coins has not been diminished in any way and
that they should be assiniilated into business and personal use as quickly as
possible. By the same token, we will urge that any tendency toward hoarding
of existing silver coins be discouraged.
"The ABA is convinced that the President's proposals will provide a long-range
and fundamental solution to both the existing coin shortage and the demands
for silver which makes it impractical to continue for the long-term future large-
scale production of silver coins. Elimination of silver from dimes and quarters
with the substitution of composite coins will provide an acceptable and convenient
coinage that has been proven suitable for automatic coin machine operations.
"While the association would have preferred the complete elinunation of silver
from half dollars also, we can readily accept the administration's assurances
that half dollars of 40 percent silver content will not produce a substantial drain
on existing silver stocks. The previous decision not to mint additional silver
dollars at this time is also sunported by this association, although we are pleased
to note that the authority to do so is being continued so as to make them available
for use in the future if conditions so warrant.
"The additional recommendations for legislation made by the President
should prevent or reduce hoarding of existing silver coins during the transition il
period to the new system. Presidential authority to prohibit melting and expor-
tation of subsidiary coins is absolutely necessary m this regard. Otherwise
there undoubtedly would be substantia amounts of silver coins taken out of
circulation and held in anticipation of a future rise in the market price of silver
at which time the coins could be sold or melted for their silver content. Similarly,
the authority for the Treasury to purchase domestically mined silver at not less
than $1.25 per, ounce is necessary to protect silver producers from a sharp drop in
the price of silver.
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140 COINAGE ACT OF 1065
"The ABA wishes to commend the Treasury Department for its excellent and
detailed study of a highly Comdex problem. During the past year we have been
pleased to cooperate with the Department iu eliminating coin shortages and we
again offer our services in helping to aSHure a smooth transition to the new coin
system."
T SUBSiniABY COINS
Although the efforts of the Treasury Department and the American BanlieTB
Association to eliminate the shortage of coin have met with some success, shortages
etiU persist in many areas. Moreover, the rise in the market price of silver to
its monetary value of $1.29 per ounce has led to hoarding of coins and silver
bullion. This, together with the increasing industrial use of silver, has resulted
in a 40-percent reduction, from more than 1.5 billion ounces to about 1 billion
ounces, in the Treasury's silver stock during the past 2 years.
The American Bankers Association, while recognizing the traditional role of
silver in U.S. coinage, is convinced tha^t a long-range and fundamental solution
to the coin shortage must recognize the fact that the sharp and continuing rise
in industrial demands for silver will increasingly limit its usefulness for subsidiary
coina^. Accordingly, we urge the following steps:
1. We urge the CongreaB to enact legislation designed to eliminate at the
earliest practicable date silver from U.S. subsidiary coins (dimes, quarters, and
half dollars), recognizingj of course, that substitute materials would have to be
suitable for automatic com machine operations.
2. We urge the Treasury not to mint additional silver dollars at this time, but
that the authority to do so be continued, so as to be available for use in the future
if conditions so warrant.
3. Consideration should also be given to temporary discontinuation of the
minting of 50-cent pieces, very few of which are moving into actual circulation.
This would permit the Treasury to divert all possible facilities to the production
of quarters, dimes, and nickels in order to build up stocks to prevent acute
shortages if hoarding occurs during the transition to a new system.
4. In order to prevent or reduce hoarding demand for silver coins during the
transition period to the new as^tem, we urj^ administrative actions, or, if neces-
sary, passage of legislation to prohibit meltmg or exportation of subsidiary silver
5. In addition, we restate our recommendations of April 20, 1904, that the
year of coinage on subsidiary coins not be changed each year, but that it remain
the same, for all coins of each new des^; and that private commercial facilities
be used as much as possible to augment the output of the mint until additional
Government facilities are in operation.
Resolution approved by the Administrative Committee of the American
Bankers Association, April 19, 1965.
Chaubeb op Coumgbcii os thu United States,
Wathington, D.C., June 8, 1966.
Hon. Wright Patuan,
Chairman, Bonee Bankmg and Currency CommUUt,
V.S. House of Bepreientatuiea,
WaehingUm, D.C.
Dbab Mb. Chairuan: The Chamber of Commerce of the United States
endorses those provisions of S. 2080 and H.R. 8743 which authoriee reduotion
of the silver content of coinage and urges their prompt enactment.
It is well recognized that current industrial and monetary demands for silver
have created a shortage of supply of national significance. For this reason we
support reduction of the silver content of coinage to the extent necessary to
resolve the current supply problem, while maintaining a metallic coinage system.
While reasonable men might differ as to the specifics of the proposed coin
composition, there can be no dissent as to the urgent need for revision in the
lk;ht of the present shortage of silver. The present proposal meets the exigencies
of the current situation with the least disruptive effect upon our system of coinage
and our economy.
Sincerely yours,
Thbboh J. Rich.
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COINAGB ACT OF 1985 141
Thb New England Council,
BotUm, Mass., June 8, 1965.
Hon. Wbiqht Patman,
Chairman, Banking and Currency Committee,
House of Representatives,
Washington, D.C.
Deab Conokessman Patman; On behalf of the New England Council, I
would like to present our views on H.R. 8748, the proposed Coinage Act of 1965,
The New England Council is a private, nonprofit organization with offices in
Boston, Mass. It is composed of 2,200 members from business, labor, education,
and government, and is dedicated to the development of a sound and dynamic
r^on through the full utilization of all of the region's human, natural, and
material reeouroea. With New England's economic development as a focus, the
orgBDization seeks to identify the region's broad public interest and promotes
appropriate programs of action to implement its findings.
New England ia baaically; a silver-using region. Its jewelrj^, silverware,
photography, and electronic industries all depend on the availability of silver
at reasonable prices. It is, therefore, vitally interested in any legislation which
would change the use of silver in coinage.
There is wide agreement that a serious silver shortage is developing. Current
projections have established that in coming years there may well not be sufficient
silver to meet both the growing needs for silver in industry and the rapidly
increasing need for more and more coins as population grows and business activity
increases. The administration has carefully studied the problem and proposed
specific legislation, H.R. S74S, to help solve it.
While we support the objectives of this measure, we have reservations as to
its adequacy. We believe that serious consideration should be given to completely
eliminating silver from autuidiary coinage. The compelling reasons for eliminat-
ing silver from use in the dime and quarter are equally vtdid for the half dollar
and we urge complete removal of silver in all suraidiary coinage. Such a step
would in no way change the value of subsidiary coinage aa currency. It should
be emphasized that there is no substitute for silver in industry, but there are
perfectly adequate substitutes for silver in coinage. It is important to plai '~~
hange only and not cri ' " ' ' ' " '
ank you for your cons
Respectfully yours,
Bbll Telephone Labobatorieb, Inc.,
Murray HiU, N.J., June 8, 1965.
Hon. Wmght Patman,
Chairman, Committee on Banking and Currency,
House of Repreaentativet, Washington, D.C.
Dear Mr. Chairman: This letter presents the views of the Bell Telephone
System in regard to H.R. 8746, a bill to authorize changes in the composition of
the 10-, 25-, and 50-cent U.S. subsidiary coinage.
The Bell Telephone Laboratories, Inc., is the research and development arm of
the Bell Telephone System, being a subsidiary of the American Telephone & Tele-
graph Go. and the Western Electric Co. Technical information developed by the
laboratories is made available to the Bell Operating Cos. through the American
Telephone 4 Telep-aph Co.
Early in 1964, m my capaeity as head, public telephone department of the
Bell Telephone Laboratories, I was requested to study the functional properties
of coins in their application in coin-operated mechanisms and to identify those
Properties which are essential for continued operation of the public telephones,
'his request by the engineering department of the American Telephone & Tele-
graph Co. resmted because of the use of 5-, 10-, and 25-cent coins in public and
senupublic telephones of the Bell System operating companies.
"To identify the essential properties of the suteidiary coinage used in public
and semipubltc telephones it waa necessary to determine the operating charac-
teristics relating to the coinage for the over 1,100,000 coin telephones presently
installed. Obviously, any incompatibility in coinage would have an extremely
serious effect on our ability to provide public telephone service. In this respect
it is of interest to note that on the average approximately 10 million coin-operated
Digitized byGoOgle
142 COINAGE ACT OF 1985
telephone calls are made each day from Bell System telephoneg and a propor-
tionate number from coin telephones owned and operated by the independent
(non-Bell) telephone companies. I understand that these independent coin
telephones require the same properties for coinage as the present Bell System tele-
phones. To permit future improvements in coin telephone service, it was neces-
sary to investigate the operating characteristics of present coinage in new and
proposed coin mechanisms which could be associated with the public telephones.
The operating characteristics of the present coin telephones and of proposed coin
mechanisms show that the size, weight, and electrical properties are crucial and
and that the latter two properties are intimately tied to the composition. Tests
using sample coinlike disks in the coin equipment show that any significant
departure from the dimensions, weight, or electrical properties of the present
silver base coinage would produce malfunction of the equipnient and rejection of
the coinage. Theoretical studies which permit a broader understanding of these
properties than is practicable with physical tests also support further thia
conclusion.
In the covirse of the study program at the Bell Telephone Laboratories we have
identified clad metal combinations which do possess similar properties as present
silver subsidiary coinage and which can serve as the basis for new compatible
coinage. We have also tested many metal combinations which do not meet the
requirements for compatible coinage. I am pleased to state that the 75 percent of
copper and 25 percent of nickel clad on a core of pure copper authorized for the
10- and 26-cent coins in H.R. 8746 has been tested by the laboratories and meets
all of the weight and electrical requirements for compatibility. Coins made from
this metal to the dimensions of present 10- and 25-cent coins will permit continued
service at public telephones. I can also state that the 50-cent silver alloy clad
on a silver-copper alloy core also satisfies the technical requirements for
compatibility.
I appreciate the opportunity of placing the views of the Bell Telephone Systetn
before the committee, and I will be available for further information at any time.
Respectfully,
W. Pfbkd,
Head, Public Telephone Department.
Alleqheni Cigabbttb Sehvicb Co.,
Piitiburgh, Pa., April SI, 1905.
Congressman Willtau S. Moorbdad,
U.S. Post Office,
Federal Building, Pillshurgh, Pa.
DxAR Congressuan: Our company is engaged in the automatic merchandising
business. As such, we are vitally interested in the forthcoming bill to be recom-
mended by the Treasury Department, proposing a change in the silver content
of our U.S. coin.
While we are not taking sides as to the continued use of silver or the elimination
of silver, we are very much concerned with making sure that the coins that are
adopted will not be inconsistent with the ability of our vending machines to accept
good coins and reject counterfeits or slugs. Our national association, the National
Automatic Merchandising Association, has spent many months in studying this .
problem. We belie\e they have covered in detail, aO the facets this problem
contains. They have made recommendations to the Treasury Department of
three alternate plans, any one of which would enable us to continue operating our .
present euipment without costly changeover or a great deal of annoyance to the
American consumers. A copy of these recommendations is being enclosed here-
with for your study.
Our company and its subsidiaries employ approximately 40 people who would
be directly affected by the adoption of a coin inconsistent with the ability of our
equipment to accept them. Far more important, I believe, to you as a representa-
tive of the people of Pennsylvania, is the serious effect it would have on the t^T-
chasing public who use our equipment in the more than 2,000 locations we service.
The enclosed recommendations of our industry's position points out that there
are more than 83 million transactions made by vending machines such as ours
every day.
You can well understand, therefore, that any coin which cannot be used by our
present mechanisms, would cost our industry thousands of dollars in order to
make our machines accept such coin. I am sure you can also appreciate thft
confusion uid the irritation and annoyance that your constituents will be fiub-
DigitizcdbyGoOglC
COINAGE ACT OP 1965 143
jected to at coffee breaks, at lunch time, and even while traveling if they attempt
to use the vending machinee to make purchases and find the new legal coins will
not operate the machines from which they wish to obtain their meal or refresh-
ments.
Your support in making sure that an acceptable coin is decided upon will be
appreciated.
Sincerely yours,
Habrt Rosen.
Thb Vending Industry's Position on Coinage
The merchaodise and service vending industry urges a solution to the shortage
of silver for coinage which will cause the least comusion and inconvenience to
the American public by assuring the continued operation of millions of existing
coin mechanisms.
Such mechanisms are used in more than 3,300,000 vending machines, 250,000
coin changers, and 470,000 music machines (plus their 1,410,000 attachments)
throurfiout the country. The operation of some 1,200,000 coin telephones is
also affected.
Acordingly, the National Automatic Merchandising Association advocates
one or another of the following alternates in place of the present 90-percent
silver alloy currently used in dimes, quarters, and half dollars;
1. A reduction in the silver content of the present silver-copper alloy coin to
any combination of silver and copper which will work satisfactorily in present
coin mechanisms.
2. A clad (laminated) coin made from outer layers of silver-copper alloy on a
copper alloy core.
3. A clad (laminated) coin made of cupronickel outer layers on a pure copper
The first two solutions require the retention of a reduced silver content. The
third requires no silver.
The vending industry is neither for nor against the retention of silver in the
coinage. It supports any solution which provides for coins that will function
satisfactorily in existing coin equipm.ent, thus assuring the American public of
trouble-free operation with both present and new coins.
Any coin made from an alloy of high electrical resistivity and density, such as
cupronickel alloy, will require the replacement of existing coin mechanisms.
The adoption of a high-resistivity alloy would also cause severe counterfeiting
and slug problems, even after all coin mechanisms are replaced.
The vending industry stands in firm opposition to such a solution.
Public inconvenience resulting from ^'noncompatible" coins would arouse
widespread resentment. Such coins would cause the disruption of operations in
thousands of plants, offices, and institutions where employees rely on vending
machines around the clock for food and refreshment services.
With more than 83 million vending machine transactions every day (and com-
parable use of coin telephones and other coin-operated devices), it is imperative
that both existing and new coins work satisfactrorily in present coin-operated
equipment.
The vending industry supports all practical measures which will insure an
adequate coin supply for U.S. commerce and which will prevent the disappearance
of coins from circulation,
Smithtown, N.Y., April SO, 1966.
Hon. 0. G. Pike,
House of Ufpresentatives, WashingUm, D.C.
Dear Sib: I am in the automatic merchandise vending machine business and
I am vitally concerned with a bill proposing & change in the silver content of our
Our national association, National Automatic Merchandising Association,
reports that 30 million vending transactions take place hourly in this country.
Pay telephones and parking meters were not considered in arriving at this figure.
More than i% million vending machines are in use today, equipped with coin
mechanisms to test the validity of the coins being used. A change in the metallic
composition of the coin could render these testing unite and vending machines
useless.
■dbyGOOgIC
144 COINAGE ACT OF 1966
Many of these machines are uaed throughout the country to vend food for
perBOnuel employed by the automotive, electrical, and steel industry. It ia
therefore, a serious problem if the present coin is changed to such an exteut that
it would not operate in our equipment. By change, I am not only referring to
the size but more important, the metallic content which determines the acceptance
of the coin in the machine used.
It is true that new mechanlBms could be manufactured but the cost per machine
and the sales lost if and when the mechanism was made available, would be
more than I could afford.
I support any solution which provides for coins that will function satisfactorily
in existing coin equipment.
Thank you very much for your consideration.
Yours very truly,
Edward N. Rosbelot.
Macee VuNDiNa Co.,
Washington, D.C., June 7, 1965.
Dr. Paul Nelson, ■
CUrk and Staff Director,
Banking and Currency Commitieef
U.S. House of Represenlativee, Washington, D.C.
Dear Dr. Nelson: I would appreciate you inclusion of my enclosed statement
in the record of the hearings before the House Banking and Currency Committee
on H.R. 8746.
Yours very truly,
Aaron Golduan, President.
Enclosure.
Statement op Aaron Goldman, President, Mackb Vending Co.
Mr. Chairman and members of the committ«e; I am Aaron Goldman, president
of the Macke Vending Co, one of the largest vending companies in the Nation.
I am submitting this statement to you on behalf of my company and the vending
industry in wholehearted support of H.R. 8746, the President's proposed legisla-
tion for a new U.S. coinage.
We beheve that any change in the coinage must be one which will cause the
least confusion and inconvenience to the American public by assuring the con-
tinued operation of the millions of existing coin-operated vending machines.
Therefore, any new coins must be compatible with existing coins in use in all
existing coin mechanisms.
Most vending machines are equipped with a sophisticated coin testing device
designed to handle a large volume and variety of coins, to give the customer
cliange automatically and to reject foreign or damaged coins and slugs. This
device tests coins for their electrical resistivity and density among other properties.
If a coin fails this test, it is diverted back to the customer. If it passes, it then
sets the machine in action. The clad coins proposed by the administration have
precisely the same properties of resistivity and density as do the present silver
coins and will, therefore, work without any cost or inconvenience in present coin
mechanisms.
The vending industry constitutes a significant factor in the Nation's economy.
Last year over 30 billion coins were inserted in vending machines by Americans
to purchase $3.5 billion worth of retail goods. These figures do not include the
number of consumer transactions involving such coin-operated devices as coul
telephones and coin-operated laundries.
Automatic merchandising has become an around-the-clock convenience in the
modern age. The fastest growing application of vending in recent years has been
in lunch and refresimient services for employees in factories, offices, hospitals,
military bases, and for students and faculty in colleges and universities. An esti-
mated 1.5 million Americans now obtain at least one meal a day from vending
machines where they work and millions more rely on vended snacks and coffee
breaks.
Any changes in the metal content of U.S. coins which would affect vending
machines would, therefore, have a vital impact on the public as well as on-food
and refreshment services in most of America's business and institutional establish-
ments.
■dbyGOOgIC
COINAGE ACT OF 1966 145
The merchandise vending industry in the United States is composed of more
than 6,000 small bugineesea that own and service most of the vending machines
in operation. Operating on a thin proAt margin many of the amall vending com-
panies could not sustain a period of shutdown, molf uuctions, and public dissatis-
faction resultii^ from a changeover to noncompatible coinage and would thus be
forced into bankruptcy.
More than 80,000 persons are directly employed by vending-machine operators
and manufacturers, a total payroll estimated at over £600 million annually. These
figures do not include the more than 300,000 additional persons whose employ-
ment derives from supplying the products and aervioes required by vending com-
panies. Any disruption of vending-machine operations could lead to dislocation
and unemployment of a significant percentage of these wage earners.
The coinage recommended by the Treaideot will provide the United States with
a coinage which will carry out fully and without mterruption and disruption its
function as a technical merchandising instrument. This is absolutely necessary
for the public interest. I, therefore, strongly urge your approval of H.R. 8746
and its speedy enactment into taw.
Statbubnt bt Sertouation Corp. in Spppobt op H.R. 8746
Servomation Corp. is a national vending and food service company engaged
in providing refreshment and food service through coin-operated automatic-
vending machines in industrial plants, schools, hospitals, and other institutions.
Through its more than 100 subsidiaries and 7,000 employees it operates in 30
States from coast to coast throughout the country and aa a publicly held corpora-
tion listed on the New York Stock E:cchange it represents approximately 4,500
shareholders.
Needless to say, Servomation, its employees, stockholders, and customers all
have a vital interest in a rapid solution of the current coinage problem which
will not be disruptive of its operations together with those of the vending industry
generally.
We are well aware of the many interests which had to be considered by the
administration in formulating any proposal for change in the Nation's coinage.
We believe that it has achieved a sound and workable solution to this difiicult
problem and that its proposal embodied into H.R. 8746 should be speedily enacted
into law.
The major feature of the bill which is the provision of a coinage which will be
compatible with the ensting coinage in all of the millions of machines presently
in use and providing serve throughout the country, is of such paramount impor-
tance that it should not he allowed to be obscured by peripheral considerations
not relevant to the basic problem and the basic issue. It should be stressed that
the achievement of compatibility does far more than avoid the wastage of many
millions of dollars in modifying present machines and the tremendous losses and
inconveniences to the public from this process, important though these are. The
fact is that a conversion of the coin mechanisms in the machines would not
ameliorate the situation since the existing coins will of course continue to be used
and the public would suSer as greatly from the rejection of such existing coins as
it would from a failure of the machines to accept the new coins. Indeed this
would serve to accentuate the shortage problem. Under the proposal contained
in H.R. 8746, however, all of these problems will be successfully resolved.
Not only will passage of the legislation proposed bring a great and positive
benefit; speed in such action is also urgently important, for such speedy action
will end the uncertainties which inevitably hamper the needed expansion of
facilities and services and will also reverse the tendency to hoarding which has
operated to aggravate the coin shortage. Servomation Corp. therefore, in concert
with the vending industry as a whole, strongly urges the Committee on Banking
and Currency to act favorably and quickly on H.R. 8746.
Respectfully submitted.
Joseph E. McDowell, President.
■dbyGOOgIC
COINAGE ACT OF 1965
Statement on President's Coinaqe Proposal
On behalf of our more than 8,000 employees, I respectfully submit this state-
ment endorsing the President's proposal for new coinage.
We are in complete support of the U.S. Treasury bill on coinage. The proposed
coins will work reliably in our present vending machines and will be welcomed
by our customers in 31 States who increasingly depend on coin-operated equip-
ment for goods and services 24 hours a day.
The passage of this legislation is vital to our company, its employees, and its
customers. As one of the largest companies in our industry, we provide manual
food service in more than 500 industrial and institutional locations throughout
America. We also provide specialized food and vending services for hospitals,
schools, and the military.
The passage of this bill provides an ideal solution to the crucial coinage problem
facing our country. It assures an adequate and modern coin supply for our econ-
omy through the years ahead and works no hardship on the millions of men and
women who comin-ise our industry.
May I respectfully urge swift passage of this important legislation.
Alex Krauer.
QiTAKBR St.\tb Cooa-Cola Bottling Co.,
PiUthvrgh, Pa., April 6, 1966.
Hon. Williau S. Moorhead,
Houte of Repreaenialivea,
Wa»hijtglon, B.C.
Dear Mr. Moorhead: Around April 15, the U.S. Treasury will recommend
that Congress pass a law to change the silver content of our dimes, quarters, and
half dollars. A change is necessary because our supply of silver is almost ex-
hausted, but if Oongresa votes for new coins, which will not work in our present
vending equipment, our operation will be in serious trouble.
We serve several thousand vending machines throughout industry and regu-
lar retaU outlets dispensing soft drinks, food, candy, cigarettes, and milk, in-
volving the services of many employees. We join the merchandise and vending
industry urging a solution to ttie shortage of silver for coinage, which will cause
the least confusion and inconvenience to the American public by assuring the
continued operation of millions of existing coin mecIianiBms.
Accordingly, we advocate one or anotner of the following alternates in place
of the present 90 percent silver alloy currently used in dimes, quarters, and half
dollars:
1. A reduction in the silver content of the present silver-copper alloy coin
to any combination of silver and copper which will work satisfactorily in present
coin mechamsme.
2. A clad (laminated) coin made from outer layers of silver-copper alloy on a
copper alloy core.
3. A clad (laminated) coin made of cupronickel outer layers on a pure copper
The first two solutions require the retention of a reduced silver content. The
third requires no silver.
We are neither for nor against the retention of silver in the coinage. We
support any solution which provides for coins that will function satisfactorily
in existing coin equipment, thus assuring the American public of trouble-free
op^^tion with both present and new coins.
Very truly yours,
Howard W. Clottgh,
Vice President, Sale*.
:dbyGOOglC
COINAGE ACT OF 1965 147
Radio Cobp. op America,
Camden, N.J., June 7, 1985.
Hon. Wright Patman,
Chairman, House Banking and Currency Committee,
U.S. Congress,
Washington, D.C.
Dear Congressman Patmani May I ui^e your support of H.R. 8746 in your
current hearings.
IndUBtjial food services rely heavily on the vending ioduatry to provide daily
food requirements to many millions of production and administrative employees
throughout these United States. Any impairment to the smooth functioning of
this important service, resulting from the use of improper coinage, would seriously
penalize the food service industry and bring about substantial financial losses to
the American business community.
Radio Corp. of America has made wide use of vending machines in its food
service program and we would like to continue to have the benefits of this service
in satisfying the food requirements of our employees.
I should tike to request that my statement be made ptirt of the record of your
proceedings.
Yours very truly,
Martin O'Shauohnesst,
Administrator, Food Services.
Gallarneau Bros.,
Amarillo, Tex., June 7, 1965.
Congressman Wright Patman,
U.S. House of Repreeenlatives,
Washington, D.C.
Dear Congressman Patman: President Johnson has proposed a clad metal
coin to eliminate the present coin shortage. I heartily endorse this proposal and
ask that you give it your support.
We are vending machine operators serving an area with a radius of 150 miiea
from Amarillo, and employ 16 people. These machines provide a livelihood for
us and serve the needs of our many thousand customers. The present coins will
remain in use for a long time, so we must have coins that will work side by side
with our present-day coins.
Our position all along has been that any coin that would work in the millions
of coin-operated machines would be satisfactory with us. Since President
Johnson has proposed a coin which will work, we ask that you give it your support.
Very truly yours,
J. B. Gallarneah.
Key City Vendino Co.,
AbHene, Tex., June 7, 196B.
Hon, Wright Patman,
Chairman, Banking and Currency Committee,
House of Representatives, Washington, D.C.
Dear Mr. Patman: We wish to advise that the new U.S. Treasury bill on
coinage meets with our approval and wish to urge your support of this most
important solution to the problem of silver shortage for coins.
It is our understanding that this new coin will operate our vending machines
as efficiently as the present coins. Since some 80 million coins are used each
day in various types of vending equipment, you can easily recognize the urgency
of supporting this proposed bill.
In our operation alone, there are about 10,000 daily purchases made with coins.
This requires the service of 10 employees. We shall be very grateful if you will
Yours truly,
Marvin Lewis, Owner.
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148 COINAGE ACT OF 1965
American Bottlers or Cakbonated Bbvekaobs,
The National Association ot the Soft Drins Industry,
Waskington, B.C., June 7, 1966.
Hon. Wkight Patman,
Chairman, Committee on Banking and Currency,
U.S. House of Representatives Building, Washington, D.C.
Mt DBAS CoNaREBBMAN Patman: The American Bottlers ot Carbonated
Beverages, the nutianal association of the soft drink industry, with a membership
compoBed of 2,461 bottlers of soft drinks doing business in every State of the
Union, ia pleased to indicate to you the support of this industry for your bill H.R.
8746 to provide fot the coinage of the United States. It is our considered judg-
ment that the approach to coinage taken in this proposed legislation represents a
realistic and workable solution to one problem caused by our country's diminishiiif;
silver supplies.
We are particulariy gratified to note that the new coins which will be minted
if H.R. 8746 becomes law in its present form, will be compatible with the coin
mechanisms which are a part of the automatic vending machines through which 8o
much of our product is dispensed. Tliis ia eapecially important to our members
who have an interest in the over 883,000 bottle-vending machines on location at
this time. These machineB each sell an estimated 132 drinks per week for a total
of 5,594,888,000 drinks per year.
It is not at all difficult to predict the chaotic effect on this vital sales segment of
our industry if coins to be adopted did not work in these machines. As noted
earlier, it appears that the coinage proposed in II. R. 8746 will be compatible with
present equipment and, accordingly, the soft drink industry would like to take
this opportunity to add its endorsement to that bill.
It will be greatly appreciated if our views on this legislation could be made a
part of the record of the hearings of your committee on this subject. Thank you
in aavance for your consideration in this matter.
Very truly yours.
Thou AS F. Baksr,
Executive Vice President.
Southern Vbndebs, Inc.,
San Aviomo, Tex,., June 8, 1965.
Hon. Wbiqht Fatman,
U.S. House of Representatives,
Wa»hington, D.C.
Mt Dear Mr. Patman: We are 1 of over 6,000 operators of automatic
vending equipment who are vitally concerned with the coinage problem existing
today. Coin-operated services are a vital part of the modern economy. Since
the present coins will be in circulation tor a long time, it becomes important that
both types work in the millions of vending machines on which the American public
has come to rely.
The Treasury proposal calls for clad metal coins, that will work perfectly in
existing vending machines, interchangeably with present silver coins. No other
new coin will work properly in our machines thus causing untold public confusion
and irritation.
We sincerely ask that you support the President's recommendations and vote
in favor for the U.S. Treasury bill on coinage.
Respectfully yours,
H. W. Hablin, Jb,, Vice Presideni.
t the Coldubiitu fob
Mr. Chairman and members of the committee, my name ia Richard K. Bancroft.
I appear on behalf of the Columbium for Coinage Association. My purpose in
appearing before the committee ia to urge that columbium be considered aa the
material to be substituted in place of ailver in the U.S. coinage system. I have
been employed by the Union Carbide Co. for the last 19 years, first as a sales
engineer and more recently as manager of product planning for the Stellite
Division of the Union Carbide Corp. with offices in Kokomo, Ind.
Digitized byGoOgIC
COINAGE ACT OF 1965 149
My company, together with four others, has formed the Colurabium for Coinage
Asaociatioa on whose behalf I am here today. The members of the OBsociation
are as follows:
General Electric Co.
Kawecki Chemical Co.
Molybdenum Corp. of America.
Union Carbide Corp.
Wah Chang Corp.
The President's message on coinage has made it abundantly clear that "We
have no choice but to eliminate silver for the most part from our aubaidiary
coinage." The question is what is the best substitute material for use in place
of silver. The members of the Columbium for Coinage ABBOoiation do not oppose
the proposed clad coins in place of the 10-, 25-, and 50-cent silver pieces historically
used in the U.S. coinage. Nevertheless, we believe that the adoption of the
composite coin is likely to prove only an interim solution for the problems which
are inherent in the coinage situation.
We believe experience with the new coins made of low cost base metal will
show that the present rejection mechanisms used in vending machines in the
United States will prove to be inadequate protection against "slugging." Cer-
tainly, the adoption of the composite coin will be a daily reminder to the public
at large that a low cost cupronickel covering bonded to a copper base metal core
will actuate the release mechanism of present-day vending machines. Indeed,
we believe that in time the vending machine industry will become the principal
victim of the proposed composite or sandwich type coin and will be obliged to
devote substantial resources to finding a more sophisticated mechanism which
will be more nearly proof against "slugging." Not only must there be more
sophisticated mechanisms but these mechanisms must be designed around a
metal such as columbium which has intrinsic value and unique characteristics
which distinguish it from base metals such as copper and nickel which may be
profitably used for slugging.
Now let me proceed to outline some of the affirmative merits of columbium as a
metal for adoption in the subsidiary coinage of the United States. Attached to
the statement which has been placed before each member of the committee is a
copy of a more detailed document entitjed "A Proposal for Columbium Coinage."
This proposal has attached to it a commemorative medal made from columbium.
I Invite the members of the committee to remove this medal from its plastic
jacket and to examine it in detail as I continue with my brief statement.
1. HISTOBT
2. PtTBLIC ACCEPTABILITZ
You will see that columbium is comparable to silver in weight, having approxi-
mately the same density, has a good "feel" and has a "ring" more like silver than
nickel or any other base metal proposed for the coinage. It also has an attractive
luster which becomes brighter with usage.
a. WeAKABILltT AND COBBOSIOK BESIBTANCE
Columbium is harder and tougher than either silver or nickel. Columbium
thus has a high degree of wearability and resistance to corrosion. Only one other
known metal, tantalum, is so highly resistant to corrosion.
4. RESISTANCE TO COUNTERTBITlNa
Columbium has a far higher melting point than silver (4,400° F. as against
1,760° F. for silver) and moreover requires specialized processing {vacuum melt-
ing). These characteristics, together with the intrinsic vaJue of the metal, tdl
contribute toward making columbium both difRcult and unprofitable to counter-
feit or to convert into slugs for vending machines.
8. WOBKABILITT AND ADAPTABILITY TO MINT PBOCESSING
Columbium is highly ductile, almost equally so with silver, and can be worked
cold. Experimental columbium coins have already been struck by the Phila-
DigitizcdbyGoOgle
150 COENAGB ACT OF 1865
delphia Mint thus establishing that coins from columbium can be produced using
the standard pressea of the Government mints. Moreover, reproduction of
detail, balance, and other characteriBtica are excellent.
Proven reserves of columbium ore are over 6 million tons, making it one of the
most plentiful of metals. The largest deposits are in Brazil, Canada, and Africa
with a substantial ore body at Powderhorn, Colo.
7. AVAILABILITY AND COST
Within a period of 18 to 24 months following the adoption of columbium for
coinage, production of this metal could be scaled up to meet any annua] coinage
demand in the range of 10 to 20 million pounds. Although today's commercial
price for columbium is high for coinage purposes, because erf limited industrial
demand, it is certain that the price to the Government would be substantially
reduced once there was an assured long-term market. For this reason, we thinlt
that the price of columbium should conservatively be estimated for present
purposes as in the range of $10 to $15 per pound or less, which would be approxi-
mately one-half the present price of silver.
In this connection I call attention to the example of the descending price of
titanium which in 1950 was priced at $20 per pound and by 1962 had dropped to
less than S3 per pound, all this as a result of the normal response of price to
increased production. The same result can logically be expected to occur with
columbium.
POSITION or THE COLUMBtlTM FOR COINAGE ASSOCIATION
As indicated earlier, the association which I represent is not opposing the
specific proposals which the President has made. However, we believe that these
proposals, if adopted, will prove inadequate to a long-term solution of the problem
and will lead to a tremendous increase in "slugging of vending machines (of the
present type). The adoption of sandwich coins will give notoriety to the fact
that copper disks combined with any of several base metals of suitable weight
can be joined together with ordinary household glues or even double-sided adhesive
tape to provide a slug which will easily pass the vending machine devices now in
use. Thus, we believe that the adoption of the sandwich-type coin will in a period
of years render obsolete today's rejection mechanisms. Ultimately the vending
machine industry, regardless of cost and inconvenience, will be obliged to develop
more sophisticated rejection mechanisms than are presently in use. Because of
its special characteristics, we believe columbium would malce an ideal choice of
metal for research on a more sophisticated rejection mechanism. The metal-
lurgical and technical resources of the members of our association are available
to assist engineers of the vending machine manufacturers in developing a rejector
unit geared to the reception of columbium and of no other metal.
In conclusion my specific recommendations to the committee are as follows:
1. That the committee make specific provisions in the proposed legislation
tor an intensive study of the "slugging" problem;
2. That this study include consideration of the special advantages of
columbium for use in more sophisticated vending machines which will be
slug proof and thus serve the long-term interests of the vending machine
industry;
3. That this study include consideration of the progressive introduction
of columbium into the coinage beginning with 50-cent pieces, which would
have the least adverse impact on existing vending machine use and yet
would offer the greatest potential per unit protection against slugging losses
when a new mechanism is developed. There is more than enough colum-
bium in the Government's existing stockpile (14 million pounds) to assure
an adequate initial supply for the new 50-cent pieces; and
4. That a representative of the columbium industry be included in the
membersliip of the proposed Joint Commission of the Coinage.
■dbyGOOgIC
COINAGE ACT OF 1966 151
Intboddction
The purpose of this proposal is to acquaint the Treasury, the Congress, and
other interested groups with the characteristics and advantages of columbium
which make it a superior candidate material for U.S. coinage, and to promote
its adoption as a substitute for silver coinage.
A number of firms active in the mining, processing, and marketing of columbium
have formed a group known as the Columbium for Coinage Association. This
presentation has been prepared and is submitted by the association, whose
memtrers are;
General Electric Co.
Kawecki Chemical Co.
Molylidenum Corp. of America.
Union Carbide Corp.
Wah Chang Corp.
Columbium has the characteristics required of a good coin material and in
addition unique attributes which, if it were adopted as a substitute for silver,
would retain the dignity and prestige of U.S. coinage.
Known world reserves of columoium exceed 6 million tons which is equal to
known reserves of sulfide nickel ores. Columbium is abundant in this hemi-
sphere and supplies iu Canada and United States are amply for any emergency.
Present production capacity is between 1 million and 2 million pounds annually.
With suitable long-term assurance of high volume demand, production could be
brought to a level of 10 to 20 million pounds annually in a period of about 2 years.
In the quantity required for coinage, we estimate the price of columbium to the
Government would be less than half the present price of silver. The use of
columbium tor coinage would so far exceed any current or envisioned applications
of the metal that raw materials and stability of price could be readily assured the
Government.
Publicity on "sandwich coins" has invited slugging of vending machine rejector
devices now in use. What is now needed is a slug proof rejector device. It ia
believed such a device eould be designed, built around the properties of columbium.
We have confidence the combined technical skills of the columbium industry and
the vending industry could solve the problem.
Eatahliahment of a healthy columbium industry would be beneficial to the
defense and space effort, nuclear power development, and would strengthen the
economies of Canada, Brazil, and many other smaller free world countries such as
Congo, Uganda, Kenya, Nigeria.
There are several reliable U.S. companies who are interested and capable of
supplying columbium for U.S. coinage. This assures the Ciovemment of alternate
and sustained aource of metal.
Nickel and copper which have been prominently suggested for all U.S. subsidary
coins are base metals widely used and essential to many basic U.S. industries.
Although there are ample world reserves of these metals, availability may depend
largely upon one or a very few firms and, in time of national emergency, broad
demand precludes availability for coinage. We have already had experience with
"white" pennies and silver mckels.
COLUMBIUM FOH COINAGE
Pvhlie acceptance
Columbium is silver-gray with an attractive luster, is comparable to silver in
weight, has a good feel, and ring more like silver than nickel or any other known
base metal used for coinage.
Wearability and corrosion resiMtance
Columbium is harder and tougher than cither silver or nickel and may be
expected to have greater wear resistance and retain imprinted detail longer than
either. Of all known metals and alloys, it is second only to tantalum i "'"~
resistance, and luster should be enhanced by usage.
■dbyGOOgIC
152 COLNAGE ACT OF 1965
Resistance to counlerfeiling
Colutnbiurn has the inherent ability to resist counterfeiting. Its high melting
point (4,400° F.), specialized processing (vacuum melting) and intrinsic value aQ
contribute to make counterfeiting both difficult and unprofitable.
Workability and adaptability lo mint processing
Columbium ia very ductile and can be worked cold. Experimental columbium
coins have already been struck by the Philadelphia Mint, usin^ their standard
presses. Reproduction of detail, balance, and other characteristics are excellent.
Su^iency of supply
Columbium ore reserves are over 6 million tons. This makes it one of the most
plentiful of metals. Largest deposits are in Brazil, Canada, and Africa, with a
substantial ore body in United States. Canadian columbium deposits alone
would be enougb to meet estimated coinage need of S,000 tons annually for over
100 years, and at Powderhom, Colo., reserves would sustain the same usage rate
for over 30 years.
Availability and cost
Within a period of 18 to 24 months it is estimated columbium production could
be scaled up to meet any annual coinage demand in the range of 10 to 20 million
pounds.
Additional facilities needed for sustained high production would relate to
mining and milling, extraction, reduction, and annealing. Ample melting and
rolling capacity already exists.
At the outset, it is recommended Uiat columbium strip or blanks be supplied
the mint. Ultimately, there is no serious technical barrier to the mint assuming
further "upstream" processing. Columbium docs not require the extensive mills
associated with steel or other hot rolled metal fabrication. Operations are clean.
Because the metal is worked cold, much of the present mint ec;uipment could no
doubt be utilized.
Use of columbium in place of present silver coinage would create a columbium
industiy. This would be healtJiy for U.S. economy by establishing facilities
furthering technology, and providing a sound base from which to expand all
commercial refractory metals. Many industries as well as the apace and military
agencies would benefit.
However, the columbium producers would have to be assured of reimbursement
for the additional capital investment necessary to produce the volume of colum-
bium required tor coinage. In this regard, it is suggested that long-term (10-ycar)
contracts with suitable amortization would be appropriate.
Today's commercial price for columbium strip ranges between $30 to $40 per
Biund. Lack of industrial demand for the metal and its alloys keeps the price
gh. However, with a long-term assured market in the volume necessary for
comage, the price to the Government would conservatively be in the range of
$10 to SI5 per pound or less. Since columbium is about 80 percent of the weight
of silver, this would mean an equivalent volume cost of about one-half the present
price of silver.
Even the most optimistic industry forecasters agree that any single commercial
use for columbium would never equal its usage for coinage if adopted and required
in a volume of 10 to 20 million pounds per year. It is probable, even assuming
columbium were someday used in eas turbine engines and other high-temperature,
space, nuclear, and corrosion appucations, the total volume required would not
equal coinage requiremeots.
This then would give the Government a high degree of control over the supply
and price of columbium raw materials and, thus, the stability of coinage.
Other important considerations which favor columbium include the following:
Columbium offers a substitute for silver which will maintain the integrity and
dignity of U.S. coinage.
The adoption of columbium for coinage would provide a final solution to the
present problem and its abundance assures a stable coinage for a century or more.
Establishment of a healthy columbium industry would be especially helpful to
the economies of Canada, Brazil, and many of the smaller countries of Africa and
the free world. To Brazil, it would mean another major export to the United
States and thus contribute aut>atantia1 aEsifitance to the political and ecoDomio
stability of the country. To Canada, it would mean further development of
columbium properties. To many smaller nations like Nigeria, the Congo, Kenya,
and Uganda, it would help build financial independence.
■dbyGOOgIC
COINAGE ACT OF 1965 153
THX MKTAI. COLiniBIIIll
Colurobium, Bometlmee cftllod niobium, is an elemental metal. Along with
tungsten, tantalum, and molvbdenum, it is known aa one of the refractorr or
reactive metala — refractory, Secause of its raeltin); point (4,473* P.) and nigh
strength at elevated temperatures, and reactive, because of ita affinity for atmos-
pheric gaBCH at temperatures above 500° F.
Sittory
Although discovered well t
rare earths.
Juat before and during the Korean war, under the impetus of demand, intenaivtt
exploration revealed laj'ge deposits throughout the world and columbium is now
known to be most plentiful. B; far the greatest use of columbium is aa an
alloying addition to nigh-temperature alloys, chiefly aa ferrocolumbium.
Occurrence and world retervu
Columbium occun aa columbit« In alluvial deposits frequently associated with
tin and in the mineral pyrochlore. Largest columbite sources are found in
AMca and Malaysia with smaller deposits scattered throughout the world.
However, pyroohlore is by far the greatest source of columbium. Canadian
deposits in the Oka district contain more than 1,260,000 tons of Cb/)i (about
875,000 tons of contained metal). Largest known reserve is the Araxa deposit
in Mioas Gerais Province, Brazil, where over 6,300,000 tons of Cb/), (4.4 million
tons of columbium metal) are proven. Other important reserves are in Africa.
A recently discovered pyrochlore body in the Congo is reported as vast, but yet
not fully evaluated.
In United States, there is an estimated potential resource of almost 150,000
tons of columbium metal — an ample supply for emergency use. Small columbium
placer operations have been carried out in Idaho and a substantial pyrochlore
deposit estimated to contain eome 70,000 tons of columbium is located near
Powderbom, Colo.
Proven world reserves of columbium exceed 6 million tons, which is roughly
equivalent to Icnown reserves of sulfide nickel. Geologists say future discoveries
will probably prove columbium to be as plentiful as copper.
Figure 1 shows major pyrochlore deposits in the free world as follows:
1. Molybdenum Corp. of America, Minas Gerais, Brazil.
2. St. Lawrence Columbium and Metals Corp., Oka district, Quebec.
3. Columbium Mining Products, Ltd., Oka district, Quebec.
4. Quebec Columbium, Ltd., Oka district, Quebec.
5. BeaucMO Mines, Ltd., North Bay, Ontario.
6. N. V. Billiton Maatschappij, Tanganyika.
7. E. I. du Pont, Powderhom, Colo.
■dbyGoOgIC
154
COINAGE ACT OF 1965
FiGuBB 1. Major pyrochlore deposits of the free world.
PKODHCTIVB CAPACITY
Following ia a discusaion of current columbium mining and proceasing activity:
Mining
The largest columbium mining operation has been ia the Oka district of Quebec
where St. Lawrence Columbium & Metals Corp. is producing at the rate of 700
tons of contained metal per year.
Amalgamated Tin Smelters and a number of smaller companies arc producing
a substantial volume of columbium concentrates in Africa and small mine and
mill operations exist in Norway and Portugal.
Mining and mill facilities at the Araxa deposit in Brazil, of which Molybdenum
Corp. of America is principal owner, are now capable of producing 3 million pounds
of columbium metal per year. There is an estimated 10 billion pounds of recover-
able columbium in this deposit alone.
Available information indicates yearly free world mine and mill production at
about 3 millioa pounds of ecguiv^ent columbium metal. There are now over
14 million pounds of columbium in the U.S. stockpile.
ProcesBing
There are five major U.S. companies active in the processing and marketing of
columbium products, as follows:
E. I. du Pont.
Fansteel Metallurgical Corp.
Kawecki Chemical Co.
Union Carbide Corp.
Wah Chang Corp.
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COINAGE ACT OF 1965 156
Other firmB having processing capability and active In the Getd to a lesser
degree include:
TJniversal-Cyelops Steel Corp.
General Electric Co.
Keniuunctal, Inc.
Mallinckrodt Chemical Works.
Stauffer Chemical Co.
Sylvflnia Electric Products, Inc.
Temeacal Metallurgical Co.
Westinghouse Electric Corp.
A. Extraetion-Teduetion
There are two methods used commercially for producing columbium metal
from mill concentrates. One is by chlorination and Hubaequent sodium reduction.
The other is by hydrofluorination and conversion to the oxide followed by carbon
reduction to pure metal.
Some firms using the lirst method have developed proprietary means of con-
tinuous extraction-reduction to pure metal.
Present extraction capacity of the five major columbium producers is about
2,740,000 pounds of contained columbium per year. Total U.S. extraction
capacity IB estimatpd at 4 million pounds annually. Existing reduction capacity
Is in excess of 2 million pounds.
B. Contolidation — Ingiri production
Three methods are used to convert the metal powders to bar or ingot for working
to mill products: Sintering, vacuum-arc melting, and electron-beam melting.
Sintering is a powder metallurgy process in which the metal powder is pregsed
cold into a bar which is Hubsequently reHistancp heated for a long period in a high
vacuum. The resultant product has good density and may be worked directly.
Tliis process is little used with columbium due to its relatively high cost and
limited ^ze bar which can be obtained.
In vacuum-arc melting, the metal powder is consolidated into electrode bars
by cold pressing. The electrodes are then melted to ingot under high vaj^uum.
Ingots weighing several hundred pounds can be produced.
iiectron-beam melting is relatively new but is now most widely used for
obtaining columbium ingot. With this process, electrons from a high-tempera-
ture element are focused in a magnetic field to produce a cone of intense heat into
which pure metal powder or bar is fed. The metal drips into water-cooled copper
molds. Ingots weighinB several hundred pounds are produced. The entire
process is carried out in very high vacuum.
Existing capacity of electron-beam melting Ls over 2,500,000 pounds of colum-
bium ingot per year. Consumable vacuum-arc melting capacity is easily 10 to
20 million pounds. Adequate melting facilities are presently available for any
conceivable demand.
C. MiU proeewmn — Forging, roUing, annealing
Columbium begins to react with gases of the atmosphere (O-N-H) at a tem-
perature of about 500° C. The result is embrittlement. Therefore, all forging,
rolling, and drawing operations are done at room temperature. This is no
Eroblem because columbium is very ductile and is capable of 99 percent reduction
efore annealing is necessary.
Normal processing includes conditioning of ingot followed by cold forging and
rolling on conventional mill equipment. Most strip and sheet are produced on
. Sendzimir mills.
Annealing is done in high-vacuum furnaces. Temperature required is 2,200-
2,250" F.
Ample forging and sheet rolling equipment is available to supply any require-
ment of columbium sheet per year. Present capacity of high-temperature, high-
vacuum annealing facilities is estimated at 1 to 1.5 million pounds of finished
product per year.
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COINAOE ACT OF 19S6
Mining and milling; ptr ftv
Canada 1,400,000
Braril 3,000,000
Other free world 3,000,000
U.S. atockplle ' — 14,000,000
Total - 21,400,000
Extraction of concentrates 4,000,000
Reduction of oside - 2,000,000
Consolidation and melting _ _ *20,000, 000
ForgiDgand rolling , ...'20,000,000
Annealing - 1,250,000
■ AviUabls at ootaet. U.B. eolDmUDm dtpotdtt tra B**llal)la u ntarm Im amtrgMio; on.
■ Orinon.
Propertiea of Mlumbium
A. Phytieal propertiet
Density 0.31 pound/cubic inohea
(SO percent of silver).
Melting temperature.. 4,474' F.
RecrTStallisatlon temperature 2,200° F.
Modulus of elasticity 15X10* p.s.i.
Electrical resisUvity 12.5 n ' '
B. Meehanictd propaiiM
Non.— Hudnaa, Boctwdl B-40.
AppUcatitmi
The greatest u.
addition to iron- and nickel'base alloys. Annual consumption in the Unite
States is about 1,000 tons. Probably less than 50,000 pounds a year of pure
columbium or columblum-baae alloys is consumed as mill product. Principal
applications are as tubing for molten salt experimental nuclear reactors and tar
nuclear fuel cladding. Also, columbium alloys are used as structural elements of
experimental aircraft, miesilee, and aerospace craft.
THE VBNDINa IHDD9TBT PBOBUBH
It is now a matter of public knowledge that copper disks combined with any
of several other base metals of suitable weight (sandwich" type coins) can be
joined together with household glue or even adhesive tape to provide a slug which
will easily pass the most sophisticated devices now in use.
The prospect is a growing slug problem which will make today's rejector units
obsolete. It seems clear that the vending industry must change rejector devices
._„ „ . , , f both
the Government and the vending industry. The latter also must be assured a
slug-proof rejector mechanism. It is believed a device can be designed to accept
only columbium coins which would provide the safeguard needed.
The metallurgical and technical skill within the companies who are members of
the Columbium for Coinage Association is available to assist the engineers of
vending machine manufacturers in developing a. rejector unit to handle columbium.
The coinage and vending problem requires a permanent somtion — not an exped-
ient. Columbium offers a plausible answer, and the columbium industry working
Vending machine merchandising is surely destined to grow. Any coin or
rdector device problem which exists today wfll only be compounded in the future.
" ..... . . ■\ ^j^i^ — jjpj ^jj exped-
im industry working
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COINAGE ACT OF 196S 157
wHh the Treasury &nd the vendiM industry can work out a tranaition program
which would minimize the effect of introducing new coinage, and the impact of
changing vending equipment.
(Whereupon, at 11:10 a,m,, the committee proceeded into executive
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APPENDIX
Thz Wmra Houbb, June S, 1985.
SnititABi: fi P&oa&AH fob a Niw and Modxbniisd U^. Coinaqb
Thb Bummary of the President's coinage program, the Treasury staff etudy of
silver coinage, ai^d the atudy of alloys suitable for use as U.S. coinage are made
available as background to the President's coinage prORram.
One underlying determination had to be made as the basic and fundamental
decision aSectins the U.S. coinage. This was: Will there be enough silver
available to justify continued large-scale use of silver in U.S. coins?
The Treasury staff study of silver and coinage came to the unequivocal con-
clusion that there is not. (See point 1 of the Digest of the study, and pts. Ill
and V of the study, and the table at the end of tUs summai?.)
There tna» no choice whether the United States should turn away from ii»
traditional htyh Hlver content coinage at Ai» time. It had to do eo became to
attempt to retain it in the face of a growing imbalance between silver supply
and demand could only result in a severe and chronic natiorud coin shortage in
the not distant future.
There was a choice in only one mailer: what tubsMute should be used for the
existing 90 percent silver coinage!
The Silver and Coinage Study provides a set of criteria for a modem coinage
(see pt. II of the digest and of the study). The new coins the President is rec-
ommending to Congress meet these criteria:
They will provide uninterrupted service as a medium of exchange. They can
be made without further major changes for a long period ahead. They are made
of materials for which there is assured access. They can be minted without
undue diffieiUty and at moderate cost. They can be used — ocroM lAe counter and
in aU of the IB miUion coin-operated denicet in use in the United Slates-^side
by side with the existing silver coins. These factors were determining in the
selection of the new dime and a new quarter despite the fact thai Ihey have a di»-
linclively digerent appearance from their traditional suver coutderparts.
The silver supply-and-oemand situation is summarized in a table at the back of
this document. It should be noted that:
In 1964, free world consumption of silver exceeded new production by a.
massive 335 million troy ounces — -11,557 tons (see the last figure in the table).
Even if no silver had been used anywhere in the free world for coinage, there
would have been a silver deficit, on the average, from 1957 through 1961
and growing deficits in 1962, 1963, and 1964 (compare the first and the sixth
columns of the table).
Coinage demand for silver lias been growing fastest, and U.S. use of silver
in coinage accounts for nearly all of tMa increase (see ttie second, third, and
fourth columns).
The entire use of silver by the United States in coins, and in part the use of silver
in the arts and industry in this country, are supplied from the Treasury's silver
stock, acquired mainly in the 1930'b. This Stock now Stands at approximately
1 billion ounces.
Thus, unless the United States acts now to ease its dependence upon silver in the
coinage, the Treasury's large Stock of silver would be gone in 2 to 3 years.
Consequeniiy, a n«tD, largely nonsHver siAsidiary coinage is proposed now,
while the U.S. silver stodc is large enough to insure an orderly transition to the
new coinage, without danger of a coin shortage, and withoxU major upset* to the
silver market.
Of the six coins in use in the United States, the new coinage prooram leaves
three unchanged. These are the penny, the nickel, and the «lver dollar.
ISO
■dbyGoogIc
160 COINAOE ACT OF IQBJI
With respect to the silver dollar:
(1) The nieer dollar remairu unchanged a» the coin it ha» been since 18S7, a coin
weighing ili% grains overall, 00 percent of iU weight silver.
(2) There are no plans at present for new production of the silver dollar.
7^ new dime ana the new quarter. — They will be the same size and have the
same design as the present dime and quarter. But they are composite coins.
They are faced with cupronickel, the alloy of 75 percent copper and 25 percent
nickel now used in the 5-cent piece. The cupronickel facing la bonded to a core
<rf pure copper. The copper core gives these coins their distinctive feature: a
copper edge.
This type of coin was selected because it alone, among practical alternatives,
can be used without interruption of service in all coin-operated devices in use In
the United States, including the 6 million coin machines that have sensors set to
reject anything other than the present 90-percent silver coinage.
This is a public convenience factor that was ^ven great weight in making
selections for the new coinage, in view of the (ollowmg: In 1964 the public bought
some $3>4 billion worth of ^oods and services, in more than 30 biUion transactions,
through merchandise- vending machines. The 1965 fibres will be bigger, because
this method of merchandising is expanding rapidly in the United States. The
public has come to depiend upon automatic mercnandising for the provision of food
and other email consumer items, at all times and in a growing number of places.
The new halt dollar.— This too will be a composite coin. But it will be almost
indistinguishable from the present half dollar. It will be the silver standard bearer
of the new coinage, faced with an alloy of 80-percent silver and 20-percent copper,
bonded to a core of approximately 21-percent silver and 79-percent copper,
giving an overall 40-percent silver content. It will continue to be minted with
the image of the late President Kennedy.
The coinage program includes a* a central feature Ae continued circulation of
existing silver coinage.
Betention of the existing silver coinage in use for an indefinite period ahead mean*
that:
Both the old and the new coins must be accepted by the 6 million coin-operated
devices in operation in the United States that use sensors set to reject coins other
than the present silver money. They do this by rejecting any coin, or slug, that
does not nave the electrit^ properties of a coin with a 90-percent ^ver content.
To be compatible in technical use, therefore, the new coins had to duplicate the
electrical properties of the present silver coins. The proposed composite coins
were engineered to do this. They do so precisely and consistently.
If an Incompatible new coinage had been chosen, the sensors in coin machines
could have been chanced to accommodate them, at a cost estimated at approxi-
mately SlOO million. This cost did not enter into decisions as to the new ccnnage,
since every industry must from time to time spend to keep in step with changes
around it. The foUowing factors were influential:
1. Changing the rejector devices in vending machines would impose upon
the public service delays of 1 to 3 years.
2. Changing the rejector devices to accommodate a new coinage with
electrical properties different from those of the existing silver coinage creates,
rather than solves, a problem. This is so because setting rejectors to accept
coins of variant electrical properties in effect desensitizes them, exposing
them to eKtensive slugging. This would raise the cost of goods sold throu^
coin operated vendors, as the losses through fraudulent use would be passed
along to users in the form of higher prices for the goods and services sold
through the machines.
The composite coins avoid all these problems.
Continued circulation of silver coifis also means that the silver coinage must be
protected from hoarding and destruction. This requires that the silver in them
must not be permitted to become more valuable — as silver — than the face value
of the coin.
This will be prevenled by continued action by the Treaiury to hold the price
of silver at not more than $1.B9 and a fraction cents a troy ounce. At this price
it is uneconomic to melt existing U.S. silver coins for their silver content.
The silver coinage will be protected in this way by the tact that the Treasury
stands ready to supply silver from its stock at the $1.29-plus price. It is
expected that the transition can be made to the new coinage, the existing coinage
can be protected, and the Treasury will stiU have a large supply of silver stock in
hand at the end of 3 years.
■dbyGoogIc
COINAOE ACT OP 1966 161
Introduction of the new coinage into circulation will start next year, if legisla-
tion authorising it receives prompt congresaional approval.
Meanwhile, the mint will continue making the existing silver coinage.
The new coins will have the same purchasing power as present silver coins.
They will be legal tender, exchangeable at full face value for all the financial
instruments of tne United States.
Use of the new coinage will permit an ultimate saving, in terms of the present
pattern of coin usage, of 90 percent or more of the silver we now put into coins.
EsUmaled free irorld tileer eoiMufflpfton aTtd produethn, t949-84
[MUlloni ol Oat troy onnccal
UK-ColiUfe demmd
Total con-
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arte
United
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rr
Total
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SIS
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i
S
K
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i
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sea
SflTCT Stddy," pi. m, table I,
Dce eqnala 480 Era
m, beaae, l,aoo,abc
■dbyGOOgIC
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TREASURY STAFF STUDY OF SILVER
AND COINAGE
UNITED STATES TREASURY DEPARTMENT
1965
Table of Contents
Foreword
Digest of the Treasury Staff etudy of silver and coinage
I. Introduction
II. Diacusaion of the criteria by which any future coin program should be
judged
A. Permanence of the program
B. Raw material requirementa
C. Public acceptability
1. Need for the change
2. Characteriatics of the new coins
3. Degree of inconvenience
4. Absence of extreme hardship
D. Mining characteristics and coinage costs
E. Compatibility with present coinage
III. Silver market trends
World production and conaumption
Free World ailver production and consumption outside the United
States - _
Conaumption .
Production ^
U.S. production and conaumption
Conaumption
Production
Analysis of changee in Treasury stocks of ulver and projected rate of
depletion
The influence of price OQ silver production and consumpKon
The influence of ailver price upon production
World silver production
U.S. silver production
The influence of ailver price upon conaumption
Prospective levels of silver price in a free market
Conclusion
IV. Metallurgioal and technical characteriatios of alternative coinage
alloys
Aluminum
Columbium-
Cupronickel
Oopper-sinc
Nickel (pure)
Nickel (Inco)- -
Nickd sUver
Hastic. _ .-
Stainless steel.. _
■dbyGoOgIC
164 COINAGE ACT OF 1905
IV! Metallurgical and teobnical chArncteri sties of altemstiTe coioAge
alloys — Continued P«»
saver, 500 fine, 500 copper ,,, 53
Silver alloy, United Kii^om 54
Silver clad coins _ $S
Other dad coins .'. 67
Titanium _ 58
Zirconium 58
Summary. (See Summary and conclusions, front of book.)
V. Problems with a changeover to reduced-content silver coinage 59
Special problems with silver alloys. 59
Mint coinage estimates 60
Treasury recovery and replacement of eiisting coinage 60
Recovery and replacement with 400 fineness coinage 69
A different approach _ 70
Conclusions *73
Appendix: Notes on retention of a silver 60-cent piece 73
VI. Further consideration of the base-metal alloys 76
Relative merits of the remaining alloys 78
Medium of exchange function and pennanenoe of solution 77
Assured access to raw materials 77
Public aoceptftbility 77
Physical characteristics 78
Operation in vending machines 78
Absence of hardship 79
Ease and certainty of production 79
Minimisation of cost of coinage 80
Balance-of-paymente cost 81
Summary: The relative merite of the base alloys 82
Changeover problems with the base alloys 82
Possible need to replace existing coinage 83
Possible interim expansion of &-cent production 84
Dimensions of the changeover problem 85
Vending machines and the changeover 87
Transitional coins _ 87
Mating, boarding, and export controls 88
VII, Conclusions and recommendations.- 90
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COINAGE ACT OF 190S
FOREWORD
This study has served as a hasic document aseiating in the develop-
ment of policies to insure the adequacy of the United States coinage.
It is the result of research and analysis that has extended over the
past 2 years. The objective was to consider all aspects and possi-
bilities of the silver and c<nnage problems.
The study is made public as an informational service. In using
it, account should be taken of the fact that since it was undertaken
qnesticms as to wear, and procurement, of some materials, then un-
certain, have been answered.
One of the central aims of the study was the application of objec-
tive criteria f<»' the developmmt of a modem coinage system. The
new coinage recommendations contained in legislative proposals being
s«it to the . C<Higres8 meet the criteria for a modem United States
coinage set forth here.
A critical part of the study was a thorough exploration of the silver
supply and demand situati<»i. This exploration provided the sub-
stance for the most basic decision that had to be made with respect
to our coinage system : had it become unavoidably necessary for the
United States to turn away fnxn the large-scale use of rilver in its
coinage!
The conclusion of the Treasury Staff Study of Silver and Coinage
that there is not a sufficieiit supply of silver to warrant the retentitm
by the United States of its traditional silver coinage is supported 1^
an independent study, commissioned by the Treasury, of the Battelle
Memorial Institute, also being made public at this time, and by other
inquiries into this subject.
RespcHisibility ior the study was cmicraitrated in the Treasury's
Office of Finuicial Analysis. However, the study has been a coopers^
tive undertaking to which perstnmel in the Bureau of the Mint, Office
of Domestic Gold and Silver Operations, the Treasurer's Office, and
the Office of the General Counsel have all ccmtributed.
ui
Digitized byGOOgIC
166 COINAGE ACT OF 1966
IMgest of the Treasury Staff Study of Silver and Coinage
[Note.— The study's final conclusions are summarized bere, followed by a brief
review of each of Its sections]
/. Summary of Conclusions and Recommendations
1. The fundamental finding of this study is that the world and the
U.S. silver supply and production situation and outlook do not war-
rant continuation of the lar^-scale use of silver in the U.S. coinage.
2. Cupronickel is the best pernianent material ioc a new subsidiary
coinage, ignoring the vending machine problem. However, cupro-
nickel coins would require "factory" adjustment of the coin rejectors
in some 6 million coin-operated vending macliines, entailing signifi-
cant costs and public inconvenience,
3. Since extensive experiments confirm that cupronickel clad on a
copper core operates successfully in unaltered vending machine re-
jectors, preferable options are available. Cupronickel-clad coins can
be used during a transition period, or permanently. An overriding
requirement with cupronickel-clad coins is the production feasibility
of the strip and the assurance of an adequate supply for processing in
the Mint,
6. Subsidiary silver coinage of reduced content, such as silver-
copper alloys clad on a low-content silver-copper core, suffers both
frtMn difficult transitional problems and incomplete assurance that
the subsidiary coinage would not be imperiled again within a fairly
short period of time, due to the shortage of silver. If any silver is to
be retained in the subsidiary coinage system, it should be limited to a
clad silver 50-cent piece of 400 fineness. There is no suggestion that
the silver content of the silver dollar be changed.
7. During the installation of any new coinage system, it will be
obligatory to hold the market price of silver at its current level of
$1.29+ in order to protect the existing coinage. Since this will re-
move the incentive to melt the existing coinage, controls over melting
would probably not serve any useful purpose. Effective controls on
the hoarding of coin appear impractical. Controls on the export of
coin may serve a useful purpose during the transition period. There
is something to be said for having standby authority to inv<Ae con-
trols. A prompt transition to base alloy coinage would make the
actual use of controls unnecessary.
8. New coins should be placed in circulation through normal clian-
neU. Every effort should be made as soon as possible to prepare for
extremely high rates of production of the new coins.
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COINAGE ACT OF 1966 167
//. Criteria by Which a New Coinage Can Be Judged
Summary of Criteria
The criteria are listed in the order in which they are discussed
rather than in descending importance. However, it is felt that the
single Tnost essential objective rrmet he the facilitation of the orderly
flow of financial and Gommereiai transactions.
A new coinage should meet the following principal criteria :
1. No interruption of essential medium of exchange function.
2. Promise of requiring minimum changes for a long period of
time.
3. Assured access to raw materials.
4. Public acceptability in terms of —
a. Need for the change.
b. Technical characteristics of the coins.
c. Degree of inconvenience the new coinage impedes.
d. Absence of extreme hardship to any group or region.
5. Minting characteristics and coinage costs :
a. Assurance of high levels of production.
b. Minimization of dollar cost.
c. Minimization of any adverse impact upon balance of pay-
ments and international financial position.
6. Compfitibility with present coinage:
a. Probable need for side-by-side circulation,
b. Vending machines usage.
///. SUver Market Trends
The discussion of silver market trends is divided into two parts.
First, the dimensions of the growing imbalance in world silver mar-
kets are established and the implications for Treasury policy are dis-
cussed briefly. Second, the extent to which production and consump-
tion of silver would adjust to higher prices is examined in order to
reach a preliminary judgment as to the feasibility of reduced content
silver coinage. [To avoid misunderstanding, it should be stressed
that while this preliTninury essam-ination of silver markets does not
definitely rule out the possibility of a low-content silver coinage sys-
tem, that possibility is ruled out hy a later examination {Section V)
of the ipeHfic di^tculfles of achieving a safe transitionJ]
1. Recent years have seen the development of an enormous gap be-
tween Free World production and consumption of silver. The over-
all deficit, inclusive of coinage demands, was 200 million ounces in
1963 and almost 340 million ounces in 1964. Even if all coinage de-
mands, United States and foreign, are subtracted, a deficit remains.
■dbyGOOgIC
168 COmAOE ACT OF 1966
2. T7.S. Treasury stocks of silver declined to 1^18 million ounces
by the end of 1964 and may be down to 1,000 million ounces or less
by inid-1965. Legislative action by 1965 on a new coinage system is
essential while Treasury stocks of silver are still large.
3. On the basis of past experience, higher silver prices and in-
creases in base-metal production promise to increase world silver pro-
duction. The independent influence of higher silver prices cannot
be estimated with any precision, but there is no reason to doubt that
substantially higher prices would lead to some expansitm in ^Iver
output. However, the currait production deficit is so large that it
cannot be closed from the production side.
4. During the last 15 years, most of the growth in the industrial
consumption of silver has occurred in foreign countries; U.S. con-
sumption has grown more slowly. There were some signs that the
recent increases in silver prices had checked the overall growth in
world industrial use of silver, but only temporarily, and in 1964
there was a sharp advance in silver consumption, here and abroad.
5. A simple extension of the postwar trend of silver prices suggests
that $2 an ounce might easily be reached by 1980 or 1986. Analyras
of supply-and-demand factors does not yield any precise estimate
of the level that silver prices might reach in a free market. The
analysis does suggest that there is a very appreciable risk that the
price could reach $2 an ounce then, or even much sooner. Battelle's
detailed quantitative projections of the rate of exhaustion of Treas-
ury stocks lead to an even more pessimistic appraisal since with coin-
age of 50 percent silver content they can foresee the complete exhaus-
tion of Treasury silver as early as 1969,
6. In view of these considerations, it does not appear that reduc-
tion of silver content to 800, 7O0, or 600 fineness would constitute a
longrun (20- to 25-year) soluticHi to the coinage problem. On the
basis of longrun supply-and-demand factors, there ia an unmistakable
risk thai a rising market price of silver would soon imperil coinage of
500 finejiess. That risk would be overwhelming even for lower silver
eonients if future U^. coinage demand could not be met exdusivehf
from Treasury sHver'holdisigs.
IV. Metallurgteal and Teehtdeal Charaeteristies of Alternative
Coinage Alloys
This section divides the possible coinage alloys into those that are
acceptable on techracal and metallurgical grounds and those that are
not acceptable. Findings are summarized in the tables that follow.
■dbyGOOgIC
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COINAGE ACT OP 1QS5 175
V. Problems Wtth a Changeover to Reduced Content Silver
Coinage
The present section examines the feasibility of achieving a success-
ful transition to a new coinage system using low -content silver alloys.
An appendix considers the possibility of a silver 50-cent piece of 400
fineness. Major conclusions can be summarized as follows:
1. The transition to silver coinage of reduced content would be an
extremely risky undertaking, and Treasury silver stocks would prob-
ably be depleted within a relatively short period of time. If tliere is
a partial and limited exception to this overall conclusion, it arises with
400 fineness where a high proportion of the existing coinage is recov-
ered at a rapid rate.
2. Even there the risks would have to be judged intolerably great
unless there were clear evidence, at the time a decision was reached,
that the coin shortage had ended and subsidiary coinage was tem-
porarily redundant,^ No one could be sure in any case that the price
of silver would not be driven again to the melting point of subsidiary
coinage; this might not occur within the immediate future. In gen-
eral, analysis of the special problem of the trangition to reduced con-
tent silver ooimnge suggests that attention can appropriately be con-
centrated from this point in the study upon the base alloy alternatives.
VI. The Relative MerUg of the Base Metal Alloys
This section first considers the respective merits of the four remain-
ing alloys: cupronickel, nickel silver, 9S percent nickel (Inco coin),
and cupronickel clad on a copper core. The nature of the production
effort required for a smooth transition is described and the possible
use of controls is examined, and largely rejected. Major conclusions
are summarized below.
1. Assuming that vending machine rejectors were to be modified,
the choice of permanent coinage material lies primarily between cu-
pronickel and nickel silver. The difference between these homogeneous
alloys is not great, although in most respects cupronickel is slightly
superior. The preferejice would be for cupronickel subsidiary coinage
with the present 5-cent piece unchanged.
2. The cupronickel {or nickel silver) clad on a copper core has the
great advantage of avoiding the need for modification of vending
machines. The Inco coin does not work acceptably, and, even if it
did, it would be superior to the clads only on the basis of appearance.
The clad coin is to be preferred since it would lead logically and easily
to a permanent coinage of cupronickel, or nickel silver, or, as seems
equally desirable, could be retained as the permanent coinage material.
■ Tbli li clearlr not tbe caw at the present time.
■dbyGo5glC
176 GOmAOB ACT OF 1065
3. Full replacemfflit'of the existing subsidiary coinage with strai^t
cupronickel could be achieved in less than 3 years with existing and
planned Mint capacity, even more rapidly if capacity were expanded
further. The Mint is conducting an exhaustive investigation of the
supply situation in the case of cupronickel clad on copper.
4. Standby authority to impose controls on the melting and export
of coin might he a useful backstop. A prompt transition to base alloy
coinage would make the use of controls unnecessary.
■dbyGOOgIC
COINAOE ACT OF 1965 177
TREASURY SILVER AND COINAGE STUDY
I. Introdaction
This study examines the silver coinage problem and evaluates ways
in which that problran can be resolved. It draws upon a range of pre-
vious Treasury studies and mmnoranda in arriving at its specific rec-
ommendations for a new coinage Eastern. Some sections of the present
study, particularly those dealing with the metallurgical and technical
characteristics of alternative coinage alleys, have also benefited from
findings of a parallel study for the Treasury by the Battelle Memorial
Institute. Ot^er sections of the present study incorporate informa-
tion that has been made available to the Treasury by private groups
and by other government agencies. The published literature dealing
with the silvw sitimtion and with suggested chuiges in our coinage
system has been examined.
■dbyGOOgIC
COINAOE ACT OP 1906
II. Discussion of tlie Criteria by Which Any Future Coin
Program Should Be Judged
The selection of a set of criteria by which alternative coinage systems
are to be judged necessarily involves a prior view as to what a coinage
system should do and how it should do it. This study takes it to
be axiomatic that, under modem conditions, the primary and essential
function of a coinage system is to assist the unimpeded flow of trans-
actions throughout the economy, by acting &s a medium of exchange.
There are collateral objectives; for example, the preservation of
historical tradition, the minimization of costs to the private sector of -
any transition to a new coinage system, the avoidance of strain upon
the balance of payments, the maximization of Treasury "profit"
(seigniorage) on coinage operations. No single plan for a new system
will be able to achieve fully all of the ends that are desirable in them-
selves.
The importance of the coinage system to overall economic and finan-
cial activity is so great that any compromises should be between the
attainment of the various subsidiary objectives, and not at the ex-
pense of the major objective of continuing to provide a reliable me-
dium of exchange.
A. Permanence of the Program
No alteration in our coinage ^stem is likely to guarantee complete
immunity from the possible future need for modification. An ideal
program should offer assurance against a shortage of coinage ma-
terials for a long period into the future. The likelihood of any dis-
ruption within 5 to 10 years should be regarded as disqualifying.
B. Raw Material Requirements
The raw materials needed in a new coinage system should be readily
available, preferably from domestic production or excess stockpiles.
Silver and ha^e-metal aUoy systems pose somewhat different problems
in this respect. With silver coinage of reduced content, the major
problems are the extent to which a higher silver price would deter
industrial uses, encourage exploration activity, and stimulate mine
production ; the degree to which existing Treasury silver stocks at the
time of the transition would be conserved by lower silver content per
coin; the effective addition to Treasury silver supplies made possible
by the capture of higher content coins in circulation at the time of
■dbyGOOgIC
COINAGE ACT OF 1905 179
the transition; and the extant to vrhich the existing silver coinage
might be lost from circulation at tlie time of the transition; and the
extent to which the existing silver coinage might be lost from circula-
tion by being hoarded, melted down, or exported. With hose-metal
alloyg, the questions are the relatively less complex ones of the avail-
ability of whatever raw materials are required as an input into coin-
age manufacture, and the strength of competing demands in relation-
ship to prospective supplies.
In the case of silver as well as base-metal alloys, there is the question
whether a coinage system is acceptable only if its materials can be
found domestically at reasonable cost, or if imported materials could
be used. From the standpoint of security, it would probably be suf-
ficient if there were substantial domestic, or even North American,
supplies relative to maximum potential coinage demand and other
vital uses during an emei^ncj period. It is true that for a time during
World War II silver had to be used in the 5-cent piece because of the
sliortage of nickel and copper, and the 1-cent piece was made of zinc-
coated steel. Certainly, it would be unwise for a coinage program to
involve a major continuing dependence upon a foreign source for raw
materials if there were strong indicaticni that supplies might be inter-
rupted because of revolution, expropriation, strikes, etc.
C. Public Acceptability
The feasibility of a change in our coinage system rests upon the gen-
eral agreement of the public that such a change is necessary and de-
sirable, and upon the reasonableness of the proposed change. It seems
probable that the main element in public acceptability will be (1)
demonstrated necessity of the change, (2) characteristics of the new
coins, (3) degree of inconvenience to which the public is subjected by
the change, and (4) absence of extreme hardship suffered by any par-
ticular group or industry as a result of the changa
i. Need for the change
In view of the silver situation, present and prospective, the existing
system of subsidiary coinage cannot possibly be cmtinued for mudi
longer,
2. OharacterUtJca of the new coins
The new coins should be similar in size, weight, ring, and color to
present coinage. It seems probable that in the new series as in the old
only the 1-cent piece should be red in color. New coins should have
wearing qualities not greatly inferior to those of the present coinage,
and any increase in durability would be a valuable dividend.
It is assumed from the outset that the existing diameter and thick-
ness of U.S. coinage will be continued. On the assumption that it is
desirable to retain some continuity with tlie past, it can also be argued
that the retention of silver in our subsidiary coinage is desirable. Cer-
DigitizcdbyGoOgle
180 COINAGB ACT OF ISftS
tainly, there is no question that continuation of subsidiaiy coinage of
the presuit silver «»it«it would offer many advantages. Because that
is not possible, the main choice comes down to subsidiary coins of lower
silver content and coinsof no silver content
3. Degree of inconvenience
Inconvenience to the public would be minimized if new coins have
desirable technical characteristics, are readily available in requted
amounts, and can be used with confidence in present coin-operated
devices.
Inconvenience will also be reduced if new coins can be placed into
circulation tiirough normal channels in the ordinary way, rather
than by requiring the public to exchange old coins for new. The
exchange approach would involve complicati<»is such as having
large numbers of exchange locations; an adequate inventory of new
coins for exchange purposes at each location; educating the public
regarding the exchange, etc. New legal prohibitions should be held
to the irreducible minimum consistent with the protectitm of existing
coinage and the achievement of a smooth transition to the new system.
4, Absence of emtreme hardship
A new coinage program should avoid inflicting a demmiatrably
serious hardship upon a particular group or industry. The coin-
miu^hine industry could claim such hardship if new coins did not
work in its machines. The manufacturers of rejector devices could
claim a serious hardship if a proposed period of transition to the new
Etystem were too short to allow an orderly adaptation of existing equip-
ment, if adaptation is required. A considerable hardship to the public
at large would arise if the usefulness of coin-operated devices were
seriously impaired over a long period of time. Silver producers could
claim that a new coinage system Uiat threatened to lead to a sharp
fall in the price of newly mined silver would place an undue burden
upon them. Silver users could claim that a new coinage system
that promised to lead to a sharp increase in the price of refined alvtx
would be inequitable.
D. Minting Characteristics and Coinage Costs
Relative ease and certainty in the manufacturing process for new
coins is particularly desin^Ie in view of the current coin Mortage.
There are anne signs that tlie coin shortage has been alleviated to a
certain degree. Even so, the need will remain for an assured transi-
tion to hi^ levels of output for the new coins, particularly since large
amounts of any new coin are likely to be taken out of circulatim tem-
porarily 1^ the public However, feasibility from the producti<m
side would have to be clearly dem<»istrated if new materials ar new
processee were to be used.
■dbyGOOgIC
COINAGE ACT OF 1B86 IgJ
He minimization of the numufacturing cost of a ^ven system of
coins of acceptable quality is desirable as a simple matter of ^ci^K^.
There is general agreement that within die limitaticms with which
the; have had to w<H'k, Mint operations have been condocted very
^ciently. A slightly broader aspect of the cost queeti<Ki is whether
or not the Treasury should seek to achieve the lowest pos^ble total
coinage cost, inclusive of materials used. Unless it can be shown tiiat
higher cost does for aame reason make coins more acceptable, there
would seem to be reastxi to favor low-cost coinage.
The possibility must be examined that the potoitial scope for coun-
terfeiting would thenhy be encouraged, although this does not appear
likely to be of consequence in the case of any alloy that would be ac-
ceptable (HI other grounds. Aside frcnn seeking the minimum level
of materials and manufacturing costs ctmasteot with coinage of ac-
ceptable quality, there is a case under present circumstfmces for hold-
ing the foreign exchange cost of coinage to reastmable proportions. It
will also be essential to insure that the tran^tjon to a new syston of
subsidiary coinage does not have harmful ^de effects on the interna-
tional position of the dollar.
E. Compatibility with Present Coinage
The production requiremmts for a new coinage system can be eased
if there is side-by-side circulaticm of new and old coins during the
period of transition. The only exceptiim would arise if it were be-
lieved that an oitire set of new coins could be produced and the sub-
stitution of new for old coins made in one step. This does not appear
to be an available altamative at the present time. Because of the coin
Mortage, it is necessary to keep Mint facUities fully employed on the
production of coins of the present type. Therefore, it is particularly
dearable that a new coinage system provide for a high degree of side-
l^-^de circulation of new and old coins.
In additicm to minimizing production problems and protecting the
existing coinage, it would be desirable that new and old coins be c<xn-
patible in the sense of working in existing coin machine rejectors. If
this is not possible, problems will be eased to the extoit that the re-
quired modification of rejectors can be made withia a reasonably
diort period of time at an expense that is not prohibitive.
■dbyGOOgIC
182
COINAGE ACT OP 1965
III. Silver Market Trends
The presoit section discusses recent trends in silver mai^ets and
the implications of these trends for a new coinage system. The dis-
cussion falls into two major divisicms. First, recent developments
in silver consumption and production are examined at world, foreign,
and U-S. levels. This concludes with a review of what has happened
to Treasury silver stocks and what is likely to happen to them in the
near future. Second, with this background established, the discussion
turns to the special problem of the effects that higher silver prices
might be expected to exert upon world and U.S. consumpticRi and pro-
duction of silver.
World Production and Consumption
Since World War II, and particularly since 1958, there has be«i a
widening gap between Free World silver consumption and produc-
tion. Continuing pressure upon U.S. silver stocks is basically at- .
tribntable to that gap between Free World production and use of
silver, although in any given year imbalances have bem met frtnn a
variety of sources including use of silver stocks, demonetized coin,
liquidation of private holdings of silver, and, for a time, sizable sales
by Red China.
The relatively sluggish expansion of silver production in the face
of rapidly expanding consumption may be seen in Table 1 which
estimates Free World silver consumption and production since 1949.
It will be noticed that Free World silver production has rissn tmly
moderately since 1958, and has averaged about 205 million ounces an-
nually over the entire period 1958-64. In that same period, world
consumption of silver, for coinage and industrial use ta^t together,
has just about doubled. As a result, the sizable annual deficits of
65 to 70 millicHi ounces that were the rule from 1949 to 1968 had
tripled to a massive 205 million ounces by 1963, when silver usage
grew to twice new silver production, despite an appreciable produc-
tion increase in 1963. Data for 1964 are still subject to revision but
th^ suggest an overall deficit of 326 to 350 million ounces, with esti-
mated total usa^ up to more than two and cme-half times the esti-
mates of total new production.
The "indicated deficits" of table 1 are gross measures of the degree
of disequilibrium that has existed in world silver maricets. Thty
■dbyGOOgIC
COINAGE ACT OF 196S lg3
considerably oTerestimate the excess demand that has actually im-
pinj^ upon world markets, chiefly because of the inclusion of U.S.
coinage demand in overall consumption. U-S. coinage demand has
been met from <^cial stocks, not from new production. From some
standpoints, it is the balance between production and industrial de-
mand, alone, that is of interest. Therefore, the indicated deficit in
Table 1 is also shown exclusive of total coinage demand, and U.S.
and foreign coinage demands are shown separately so that other meas-
ures of the deficit can readily be computed. Fordgn coinage demand
is, by and targe, met in the market. But, in terms of the overall bal-
ance between world consumption and productitm, inclusion of all de-
mands is the indicated course to follow, whether met from existing
stocks or current output. Indeed, it might even be ai^ed that U.S.
coinage demand should be increased to include the amotmts of old
silver dollars placed in circulation during recent years. To do so
would raise 19S3's indicated deficit by more than 50 million ounces.
Although the indicated deficits cannot be interpreted literally as
measures of excess demand, these gross statistics do show most clearly
the drastic alteration that has taken place in world silver consumption
and production, and the overall dimensions of the Free World pro-
ducti<«i deficit. It is particularly dgnificant that in each of the last
6 years the use of silver in industry and the arts has, itself, exceeded
new production.
Tabu! 1. — Estimated Free World Silver Consumption and Production,
[Inmmiowortb»li«;o<i
DCMl
trti
U.BA.
s
Total
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a)
B)
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(6)
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ign-STanncB
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Bi.e
187.0
2A4.S
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218.8
-20(1.1
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Bouree: Cidumru (!) and IJ) an From Huidr and Harman, ^wnwl Rttlem, Cotoion (4) 1> dcrlvsd
hns tha world totala pobUsbed In tbe jlnnuoj RcfKirti ii/U< [MrMUr a/U« MM and compllsd br tbB Bunaa
oIUlDca. Production tor the tollowlnc countilw hu baen subtracUd from tb« vodd totals: Cuchaatarakla,
BHt Ormun;, Hungary, Kumsnla. Poland, U.S.B.K,, CUoa, and North Eorga. Tha world iBOdoetiaa
Mlnuto hrignlii troni the Bureau ot tCnes, Mineral Iniuttti auntn, Angmt Zl, IMt; and that lot tHM
li frnn Handy and Harroan, Annual RtrUu, IVM, adluit«d On the baili oltbc 1HS-S3 nlaUoniblp botwean
tbe Haadr aod Hannan and Bnmo ol Ulnn oi
■d by Google
|g4 COINAGE ACT OF 196S
This Strongly suggests the poesibility that, even if coina^ demuid
for silver were to dry up entirely, there would still be an appreciable
gap betwem the world's industrial consumption of silver and prospec-
tive levels of silver produced at current prices. Since U.S. coinage re-
quirements have been met from existing stocks of silver, market de-
mand would not be directly affected if the United States were entirely
to discontinue the use of silver in coinage. If other countries were also
to abandon the use of silver for coinage, and if their demands had
previously been met from current production, there would be scHne re-
sulting effect upon market demand. But, total ctMisumption require-
ments would still appear quite likely to continue to exceed current
jiroduction at the price-cost relationships now existing in the silver
industry. In 1968, for example, it will be noticed from Table 1 that
there was an indicated Free World deficit of about 40 millint ounces
wholly aside from coinage demand, and this deficit appears to have
widened to 70 million oimces, or so, in 1964 when speculative purchases
of silver again became important, as they were in 1961.
The possibility that a sharp reduction in coinage demand would
still find silver in relatively short supply in world mai^ets does not
take into account the effect on silver prices of any ultimate di8po6iti(m
of existing c^cial stocks. World silver stocks in official hsjids out-
side of the United States are believed to be quite modest in ^ze.
On the basis of the statistics presented in the Annual Report of the
Director of the Mint, ihey would appear to total little more than 100
million ounces. As for this country, at currrait rates of U.S. coinage
demand and bullion redemptions, the question is scarcely one of how
to dispose of any residual U.S. official stocks without disrupting the
market. Existing U.S. official stocks of silver are likely to be no more
than adequate for the short^nm 3ta:bilization of world silver prices
which the United States will find essential in making an assured,
trouble-free transition to a new coinage system. Even if the deci^cm
is to r^lace silver subsidiary coinage with a base alloy, scHne silver
might be required after the transition period for stoc^ile or othse
purposes.
Unless <Hie envisions some radical departure frcnn the recent pat-
tern of world industrial consumption and production of silver, de-
mand for silver appears certain to be strong over the long ran, even
if silver is veiy largely abandoned as a coinage material.
Free World Silver Production and Consnmption Ontdde the
United States
Until recent years- there had be^i approximate balance between
silver production and consumption outside of the United States, but,
in the last few years, overall deficits of some size have begun to ap-
DigitizcdbyGoOgle
COINAGE ACT OF 1965 Jgg
pear. Table 2 eetimatce f<Hvign sUver producticHi and consumption,
1949-64.
Conawwption
The rise in foreign use of silver in industiy and the arts has heai
very great. It is estimated that Free World foreign industrial use of
dilver may have amoimt«d to something like 60 million ounces prior
to World Wwr II. That level had been regained by 1958. A period
of rapid growth in aHver consumption then led to more than dou-
bling of the 1953 level by 1961. Industrial demand in Canada, United
Kingdom, France, West Germany, and Japan rose more or less stead-
ily fr<»n an average 35.8 million ounces in 1949-52 to an average 96.4
million ounces in 1959-62. The increase in the industrial use of
silver has been most striking in West Germany and Japan. There
was scwae indication of a reduced rate of growth in Ft«e World in-
dustrial use of silver outside the United States during 1962 and 1963,
probably due to the effect of the increasing price of silver in those
years. However, as the price of silver remained at the ceiling im-
posed by the mcMietaiy value of the U.S. silver dollar during 1964,
the growth in foreign industrial use of silver was very sizable, some
20 million oimces on the basis of preliminary data.
Foreign coinage demand remained relatively stable through 1969,
averaging about 40 million ounces annually. It then rose appreciably
in the period from 1960 through 1964, when it averaged some 65 millicn
ounces annually, with a good part of this increase accounted for by the
French coinage program. Future coinage demand in the Free World
outside of the United States is difficult to estimate, but few observers
see much likelihood of any marked further expan«on fmn present
levels. Foreign coinage demand might very possibly decline.
Prodiustion
Production of silver in the Free World outside the United States
increased fairly steadily until 1958. It th^i reached a temporary
plateau, before increasing by about 8 million ounces in 1963. Prelimi-
nary reports suggest that foreign producticoL in the Free World did
not rise by a similar amount during 1964. As a result of relatively
slow overall growth in production and rapidly increasing demand, the
surplus of new producti<Hi over consumption, which had already begun
to narrow sharply after 1954, disappeared altogether in 1960.
Deficits have been substantial since that time. The indicated deficit,
including coinage demand, has averaged a little less than 30 millitHi
ounces annually in the last 5 years. The deficits were larger in 196]
and 1964, partly, it would seem, because of some speculative purchases
of silver in each of those years. Excluding coinage demand, produc-
tion of silver in the Free World outside the United States has exceeded
ctmsumption by an average 32 million ounces during the last 5 years,
but this surplus fell in 1964 to 13 billion otmces.
■dbyGoO§le
186
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AOE ACT
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COINAGE ACT OF 1966 lg7
VS. Prodnction and Consamption
Conawmption
In ctHitrast to the very rapid ^;rowth in foreign silver consumption,
industrial consumption of silver in the United States has not changed
greatly in the postwar period. As shown in Table 3, industrial con-
sumption averaged about tOO million ounces during 1949-52 and had
only risen to about 110 million ounces by 1963, although it apparently
increased to more than 120 million ounces during 1964. Thereis some
evidence of a cyclical pattern, with declines in 1954 and 1958, but not
much sign of the sharp upward trend that has characterized foreign
silver consumption in most of the postwar period.
Detailed statistics on the usee of silver coosimied in industry are
scarce especially in the case of foreign countries. However, the U.S.
data presented in Table 4 give some indication of the relative impor-
tance of silver in various uses and of the changes that have taken
place since 1959. The general picture is (me of relatively rapid ex-
pansion in newer uses — batteries, electrical and electronic compo-
nents — and s(nne contraction in more traditional uses — silverware
and jewelry. Photographic use remained about constant from 1961
through 1963, before increasing substantially in 1964. These end-use
statistics suggest a slightly higher level of tJ.S, industrial consumption
in 1964 than the 123-miIlion-ounce Handy and Harman figure used
elsewhere in this study.
U.S. coinage demand averaged a little under 40 million ounces an-
nually from 1949 through 1960. Coupled with relative stability in the
industrial use of silver during the same years, this meant that total
U.S. silver consumption remained relatively constant. For example,
U.S. industrial demand plus U.S. coinage demand was 148.8 millicm
ounces in 1958 and 146.0 million ounces in 1960. Subsequwtly, silver
requirements for coinage have grown at a tremendous pace, most re-
cently because of the Treasury's efforts to overcome the shortage of
subsidiary coin. Accompanied by a moderate increase in industrial
demand, the result has been more than a doubling of overall U.S. con-
sumptiiHi of silver in the 4 years since 1960. On the basis of avail-
able statistics it appears that U.S. industrial consumption plus coinage
use during calendar year 1964 amounted to about 326 millimi ounces;
it was less than 150 milli<m ounces in 1960.
Production
Production of silver in this country has remained remarkably con-
stant during the postwar period — a fact which suggests that there may
be no dramatic increases in the offing. During the individual years
covered in Table 3, production fluctuated narrowly between 35 and 40
million ounces except for a 1959 decline to 23.0 million caused by a
prolonged copper strike. Early indications are that 1964 refinery pro- .
duction of silver may amount to about 36 millicai ounces. From 1949
■d by Google
COINAG
1 a«
B ACT OF 1065
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„Googic
COINAGE ACT OF 1BS5
189
through 1960, approximate CMistancy in production and relatiTely
stable consumption held the U.S. silver deficit around an average of
about 100 million ounces annually, or about 65 millim ounces exclu-
sive of coinage demand. However, the deficit has wid«ied witli the
precipitous increase in the coinage demand tor silver and probably
totaled more than 290 milli(si ounces during calendar year 1964.
Table 4. — Ettimated U£. SUver Consumption, by Field of Use or End
Product, 1969-ei.
[Id millioDB of fine troy ounoefl]
naldofDnoraidpnidpot
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3.5
10.5
4.8
20.6
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3.0
5.0
11.0
4.9
24.0
3.1
6.0
13.0
5.0
25.0
3.1
1.0
33.3
22.0
2.0
6.2
13.0
5.1
26.0
3.1
.2
33.3
22.0
1.1
BrasingaUoyB and solden
15.8
Photographic film, {dates, and sen-
30.8
28.0
31.7
29.0
32.3
26.0
.2
SUverware and jewelry..
22.6
Net induBtrial use
101.0
102.0
105.5
110.4
110.0
127.1
K [NiblUnd Id tba (teir» wt w» Ibm*. Apr. », UU,
The lower section of Table 3 summarizes briefly the way in which
the indicated deficit between n.S. silver consumption and production
has been met. An excess of commercial imports over exports, rang-
ing fnxn 50 to 100 million ounces, has typically met a substantial
part of industrial needs. The decline of net imports in 1961 reflects
higher silver exports and during 1964 there was a net export of
silver because of the sharp increase in bullion redemptions, some
of which were undoubtedly for foreign account. Lend-lease returns
of silver are shown separately in the next line of the table, and \ha
change in Treasury stocks of silver is the last- entry for whidl direct
information is available.
A final line in the table shows the discrepancy between the indicated
deficit and the amount accoimted for by net imports, lend-lease re-
turns, uid changes in Treasury stocks. While this discrepancy con-
tains residual errors and Treasury sales of silver to Government
agencies, it may also provide a rough measure of changes in domestic
inventory. Be^nning in 1959 the residuals are consistently nega-
■d by Google
190 COINAGE ACT OF IQSS
tiTB in fflgn which would be the case where there were net domeetic
accumulation of privately held inventories of silver.
Analysis of Changes in Treasary Stocks of Silver and a
Projected Rate of Depletion
The dominating feature of the world silver situation is the existence
of a massive production deficit. As noted earlier, the indicated world
deficit in 1963 was about 210 million ounces, 25 million ounces in
the Free World outside the United States, and 185 million ounces
in this country. During 1964 the overall world deficit widened to
325 to 350 million ounces, chiefly because of a sharp increase in U.S.
coinage demand. As Table 3 shows, the indicated U.S. deficit of
185 million ounces in 1963 was almost exactly matched by a dedine
in the Treasury's stock of silver. In 1964, U.S. silver consumption
(both industrial and coinage) exceeded production by about 290
million ounces, and Treasury stocks fell by an even larger amount
because of increased redemptions of silver certificates. In 1966, tb%
consumption deficit seems likely to be substantially larger than in 1964.
The past decline in Treasury stocks of silver is detailed in Table 5.
A rough indication of the possible rate at which remaining Treasury
stocks might be depleted can be obtained by simple exten^on of the
rate of loss in recuit years. It is true, of course, that any projec-
tion of that nature is limited in its value by uncertainty as to the
shape that future developments will take. The single most impor-
tant future influence in 1965 will be the nature and timing of the
Treasury's own legislative recommendations and subsequent devel-
opm^tts in Congress. Additional factors are the extent to which
the existing Coin shortage can be overcome by the much higher levels
of coin production now underway, and the point at which declining
Treasuiy stocks of silver would cause a sustained acceleration in the
demand for the redemption of silver certificates.
The data of Table 5 for past yeara have mainly come from Treas-
ury DaSy Statements and Circulation Statements, In the interests of
umplicity in presentation, a number of relatively minor influNicee
upon the Treasury silver stock have been grouped into the single cate-
gory "other causes of change." It should be noted that the total silver
stock figure shown in Table 6 includes the four Daily Statement cate-
gories : "Silver," "Silver dollars," "Subsidiary coin," and "OtJier sril-
ver bulion," This overall figure customarily exceeds the single Daily
Statement entry for "Silver" by varying amounts which have recently
averaged some 30 to 35 million ounces. Working with the lai^r
total allows Table 5 to provide a more coherent picture of the separate
influences on the Treasury sdlver stock.
The three memorandum columns at the extreme right give the
amotmts of silver certificates outside of the Treasury ctniv^rted to a
14
Digitized byGoOgle
COINAGE ACT OF 1966 191
bullion equivalent at 0.7734376 ounce6 per dollar. It will be noted
that b; the end of 1964 retiraiiMit of silver certificates had reduced the
bullion equivalent of those in circulation almost 300 million ounces
below the total TreasuTy silver stock. As long as retirranent of silver
certi5cates proceeds at a rate in excess of the decline in the Treasury's
silver stock — as it has thus far in 1965 — the Treasury's margin of
"uncommitted" silver will be widening. No doubt the rate of retire-
ment of silver certificates will fall over time, particularly since a rela-
tively large amount of silver certificates are probably lost or destroyed
and will never be presented for redemption or retir^nent. There
would be no point in immobilizing any substantial fractitm of Treas-
ury silver as backing for these notes and it might conceivably interfere
with an orderly resolutipn of the coinage problem.
On the basis of the information in Table 5, it appears possible that
Treasury stocks of ^Iver might be depleted in 2 to 3 years if present
trends continued. The iKY>iected rate of use of silver in coinage
would probably fall back as the present crash coinage prc^;nun
achieved its aims. On the other hand, it is quite poasdble that the
Treasury would have to supply larger amounts of silver in holding
the market price of silver—an absolute essential to protect the existing
coinage — as its own stocks neared depletion.
The latter possibility counsels against any delay in beginning the
transition to a new coinage system. It is encouraging that redemp-
tions of silver certificates in the early months of this year have been
relatively modest in amount, well below the peak levels last year when
a dock strike and other factors led to a sharp but temporary increase.
This decline in the rate of redemptions has been more or less roughly
paralleled by a decline in the futures price of silver which may well
signify that market expectations of any increase in the spot price of
silver are considerably dampened. However, it is clear that any
failure to proceed promptly with the creation of a new subsidiary coin-
age system reducing the need for silver would encourage speculation
and might lead to a rapid depletion of Treasury stocks of silver.
If the Mint were to switch over to the production of nonsilver coin-
age by the banning of 1966, Treasury stocks would surely be adequate
to stabilize the silver market through sales and/or redemptions during
the time that would be needed to produce large amounts of new, non-
silver coins.
If the Mint were to switch over to the production of reduced contrait
silver coinage during 1965, it is not self-evident that Treasury stocks
would be large Miough to hold world silver prices below, say, $1.29-t-
during the transition period, let alone for any extended period there-
after. Stocks might conceivably be adequate to negotiate the transi-
tion, but a favorable outcome depends upon a number of factors about
which little assurance can be f^t. Ket coinage lequirements would
■d by Google
192
COINAOE ACT OF lOSG
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194 COENAOE ACT OF 1966
probably be smaller (private hoarding could outwei^ Treasury net
recoveries of silver from the existing stock of coinage), but speculative
demands for silver would surely be much larger. The market would
not expect that the Treasury would, or could, hold silver prices at
$1.29+ beyond a fairly short period of transition, and the volume of
Treasury redemptions, or sales to the market, at $1.29+ could expand
rapidly as the market anticipated the imminent appearance of much
higher silver prices. Indeed, this psychology could even develop with
a transition to base alloy subsidiary coinage if at the same time the
silver content of the dollar were reduced since this would raise the
monetary value of silver and encourage the belief that the market price
would also rise.
The problem of the transition to silver coinage of reduced content
isexaminedmorefullyinSectionV of this study.
The Influence of Price on Silver Production and Consumption
The remainder of this section of the discussion will examine the
extent to which an increase in the market price of silver would be
likely to bring production and consumption into an early balance.
In principle, there should be some increase in the relative price of
silver that would help to bring about market equilibrium. Higher
prices can be expected to encourage net substitutions and economies
in use on the consumption side and also to encourage some increase in
silver production beyond that which would otherwise occur. In the
context of the present study, the pertinent issues are the size of the
increase in price that would be required, and the nature of the adjust-
ments that would take place during a transition to the new equilibrium.
Only the first of these issues — the eventual price at which the market
might balance — will be discussed at this stage. It must be ^nphasized
that at this stage no attention is to be paid to the feasibility of achiev-
ing a successful transition to a new system of reduced content silver
coinage.
Actually, the question of how the transition would be achieved is
fully as important, indeed much more important from the standpoint
of the Treasuiy and the provision of an adequate supply of coinage,
than the eventutd price at which the market might settle. Any pro-
posal to reduce the silver content of U.S. coinage would have to allow
for the fact that a quicker supply response to rising silver prices would
come from existing stocks of silver — including silver coinage in cir-
culation — than from an expansion in new production, which would
only occur after some lapse of time. Because an increase of market
price much above $1.38 an ounce would imperil the existing subsidiary
coinage, the transitional pn^lems take on unique significance. How,
or whether, the transiticm to silver coinage of reduced silver content
could be effected is a complicated issue, better explored separately
Digitized byGoOgle
COINAGE ACT OF 1966 195
from the probable longer-nm effects of higher price on the consump-
tion and production of silver.
Consideration of the prices that might eventually be reached in
silver mai^ets, after the transitional period during ^rfiich price would
have been stabilized, can, however, throw a good deal of light on the
practicability of replacing our present coinage system with one of
reduced silver content. Reduction of the silver content of our existing
coinage ^stem would increase the ceiling, or ceilings, to which the
market price of silver could rise before Treasury sales of silver to the
market would again be required. If it appears that the market price
of silver might again reach the monetary value of our coinage within
a reasonably short period of time, reduction of silver content could not
be regarded as an eli^ble long-run solution, irrespective of whether
or nc4. the immediate transition could be safely negotiated.
A limiting consideration is the fact that straight silver-copper alloys
with less than SO percent silver content are not acceptable because of
their poor physical characteristics. It will be assumed, pending Sec-
tion IV's examination of the technical and metallurgical character-
istics of alternative coinage alloys, that silver-copper coins of 800,
700, 600, and 500 fineness do meet at least minimum standards of ac-
ceptability and are relatively easy to produce. However, lower silver
contents can also be achieved by cladding silver on an inner core of
copper or lower content silver and 1^ adding some nickel and zinc
to otherwise unacceptable silver-copper alloys. These possibilities
will be discussed subsequently. For the present, with attention con-
fined to straight silver-copper alloys, the question is whether, after
the transition to a coinage system with reduced silver content, silver
prices would be at all likely to reach the ceilings listed in Table 6. If
dialysis of supply and demand factors su^ests very strcmgly that the
ceiling associated with a certain silver content could be reached in the
foreseeable future, that particular coinage alternative would have to
be ruled out as a Img-run solution.
Table 6. — Monetary Value of UjS. Coinage of Existing Thickness
and Diameter for VariouH Silver Contents
silver conteDt
90 percent.-
80 percent- _
70 percent
60 percent
50 percent
Sauna; Bureau ol thg Mint.
$1. 29-1-
1.48-1-
1.71-1-
2.03-1-
2.48-1-
$1. 36+
1.58-1-
1.83-f-
2. 17+
2.66-^
■dbyGoogle
196 COINAGE ACT OF 1966
The Inflnenee of Silver Price Upon Production
An increase in the price of silver which led to an increase in tlie
expected profitabilitj of silver mining would normally be expected
to lead to some subsequent increase in production. Higher prices
would tend to encourage more exploration, higher production from
mines already in operation, reopening of sulHnarginal properties, and
the reworking of old mine tailings. The strongest influence of higher
silver prices, as such, would be upon the segment of the industry en-
gaged in silver mining proper. In that case, the immediate effect is
to increase total revenue per ton of ore in direct proportion to the
increase in silver price. Where silver is found in association with'
other metals, the importance of a silver price increase is modified by
the proportion of total revenue attributable to silver. Where only
traces of silver are found with other metals, the increase in revenue
wilt obviously not be of much consequence. Between this extreme and
that of pure silver mining there is a range of situations in which an
increase in silver price will have a greater or lesser effect upon com-
pany receipts.
Against the nominal stimulus to production from a higher price
must be set the fact that silver mining is not a manufacturing opera-
tion. A higher price for silver may be required simply to maintain
production at a given level. As marginal mines and deposits are
worked out, continuing exploration activity is required even to main-
tain known reserves at a constant level. This exploration activ-
ity can be increasingly expensive in relationship to the market value
of the new silver reserves that are discovered. Technological progress
in exploration and mining techniques can arrest or even reverse a tend-
ency for tJie level of reserves and the amount of current production
to decline at any fj^ven level of silver prices. But, a fairly rapid rate
of technolt^cal progress may be essential not only to overcome dimin-
ishing returns to exploration effort, but also to offset the effects of
steady increase in money wages and other costs over time.
Shallow deposits of silver have presumably been well worked over
and deep mining is very expensive. Private efforts here Emd abroad,
and the Bureau of Mines fallow drilling program in this coontry,
may discover sizable additional silver deposits near to the surface.
The recent find of Texas Gulf Sulphur in the Timmins region of
Ontario is impressive. Published reports at the time estimated that
55 million tons of copper, zinc, and silver ore, with an average grade
of 4.85 ounces of silver per ton, had been found under an overburden
of 20 feet. It would seem unwise to count on finds of this sort oc-
curring frequently, but it does suggest that sizaUe new finds may
occur.
Rising silver prices would exert some effect on the overall profit-
ability of mining operatirais in which silver occurs in byproduct as-
DigitizcdbyGoOgle
COINAOE ACT OF 188* 197
sociati<«i with other metals. Data are not avsil^Ie to estimate the
extent of any stimulus to base-metal mining that would result frran
a higher price of silver. However, it is well to recognize that the
very concept of a byproduct is to some extent a convenient accounting
fiction and while higher silver prices may not make "by-products" into
"co-products" in very many cases, some overall stimulus to the profits
ability of base-metal mining and some consequent increase in silver
production could be expected to occur. There is no evidence, how-
ever, that this stimulus would be very strong.
The main line of causaticai is not likely to run from higher silver
prices to base-metal mining. Instead, a major influence upon levels
of silver production in the future, as in the past, will be the amounts
of copper, lead, and zinc that are produced, and the proportion of
silver in total tonnage. Therefore, estimation of the direct effect of
higher silver price upon its production must be supplemented by esti-
mation of the amounts of silver that will be forthctuning as a more or
less natural ctmsequence of expansion in base-metal mining.
World SilTO* Production
Some major characteristics of world silver production since 1900
are summarized in Chart 1. It will be noticed that there has been
a substantial degree of correspondence between shcal-nm fluctuatitxis
in the output of copper, lead, and zinc, and the output of silver.
Longer-run trends in the production series were similar until the
period following World War II. Since 1945 aggregate world output
of copper, lead, and zinc has grown rapidly ; the output of silver has
also increased, but more slowly.
S<Hne of the appearance of syniihronous fluctuation in the upper and
lower panels of Chart 1 is due to the three interruptions to productitm
ca-used by World War I, the Great I>epres9ion, and World War II.
HowevBr, there is little doubt that the byproduct Telatitmship also
accounts for much of the parallelism in the production movements.
Unfortimaitely, there are no comprelhensive historical data available
at the wcH-ld level on the amounts of silver mined as byproduct and
mined as pare silv^. This obstructs any conclusive atatistical evalu-
Atioa of the separate influence of base-metal production and silvw
price uptMi tJie production of silver. Such evidence as theffe is suggests
that the byproduct relationship has generally been the more impor-
tant.'
'Tbe price and bn>riM)Dct InflneneeR were tntcd b; a multiple correlatioD of world
tUver prodncUoD witb Bllver price and tbe aKgresite ontpat of copper, lead, aod line
darlDK tbe lSOO-1968 period. Bnatlc Inflaencrs upon gUver productlOD were lo Btrong
doring the period tbat the orerall corrclBtlon fa a verj poor one, wItb onl; aboat 35 percent
of tbe overall varlatloD In lUTer production explained b; allTcr prices aod baae-inetala
prodnctlon takea together. Silver pricea aad production were actually negntlTel; cor-
related, althongb baae^netal production waa. aa expected, poaltiTelj' related with allrer
^db, Google
COINAGE ACT OF 1965
Clurt I
FACTORS AFFECTING SILVER PRODUCTION
1900 to Date
T0»
S
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of Selecte
Mintrala
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4
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m
Indeed, the statistical association of silver production and silver
price does nob appear to have been pajticularly close or consistent.
Until tlie depression of the 1930's, there is indication of an inverse
retation^p with production falling when price was rising, and the
prodnctton. T&e nditlonibliw are much clour Id the poltwar petlod, partlcalarlf betimu
allTer production aod tbe production of bate metals, HoireTer, the period of time Is short
and tht correlation between sllTer prices and blse-metBls production Is relatlTelj bi^.
Under theee eondltlona, the multiple correlation technique does not yield dependable
estimates of the Independent Influence of the elplonatorr variables, In this caie sUtct
price an A base-metBls prodaetlon.
Digitized byGoOgle
COINAGE ACT OF 1965 199
revOTse. Price and production did fall sharply togethw during the
early depres^on years and liheii rose together under the stimulus of
the U.S. Silver Purchase Program, and a gener^ revival in base-
metal mining. Aside from this cyclical rise and fall, silver price and
production seem to have been most closely related in tlie period fol-
lowing World War II. But, this has abo be^i a period of veiry rapid
growth in base-metal production which would account for tlie ob-
served increase in silver produoti(»i. In all likelihood the sustained
postwar expulsion in ocq>per, lead, and zinc output has, in faob, been
the dtxninant influence on world mlver producti<»i. The postwar in-
creases in the price of silver may bave played some limited part in
encouraging the expansion of output, especially in regions where
pure silver mining is important. However, it is only recently ihst.
the price increases have been sizable and more time is needed to see
just how much new production will be forthcoming as a result.
Increases in copper and zinc production in the postwar period have
far exceeded the expectations generally held in the early 1950's. It
is itfteresting in this ccHmeetion to ctHupare the actual increases that
have occurred with the projections for 1975 made I^ the Pfdey Onn-
mission in 1952. Table 7 shows that by 1&62 copper production al-
ready exceeded the Paley Ck>imnisBion estimate for 1975 by a wide
margin. World copper reserves are very lai^ and the Pi^ey esti-
mate for 1975 is quite unlikely to prove to be accurate. Zinc produc-
tion also gives every indication of rising well above the Paley esti-
nuvte; the estimate for lead producticHi may be closer to the mark. The
apparent failure of these projecti<»is, made little more than a decade
ago, to anticipate trends in base-metal mining is a sobering reminder
of the difficulties involved in any long-range forecast.
There are some general features of the experience since 1900 that do
offer guidance as to probable future levels of silver productitm. Dur-
Table 7. — Comparison of Paley Oommiaswn 1975 Estimates of Free
World Copper, Lead, and Zinc Production vnth Actual Prediction,
1950 and 196S
wateaa
lOBSKtml
Filer Mtlmala
FoiwbuttbiaMn
imvmlKO
omiMO
Copper
2,515
1,644
1,93!
4,145
2,060
3,010
3,850
2,700
3,200
6K
26
56
Lead
Soorci: Report of the Prcaldent'* UftlerJali Policy
um] BimMi ol Minea.
Du,iiz=db,Googic
200 comAOE ACT OF iftes
ing the entire period since 1900 the overall trend in silver prodaction
has been posdtive, but not vofj large. On the basis of the production
experience ^nce 1900, the annual average increase in world mlvra- pro-
duction has been only about 825,000 ounces. Silvw productiwi has
known extrane variations in the past, and this cautions against the
acceptance of any mechanical projection of past productitm lev^ as
a guide to what could happen in the future.
Conditions in the postwar years are more relevant as an indication of
the degree of future expansion in silver output that may be expected.
The 325,000 ounce annutd production increment, based upon the entire
experience since 1900, is far too low as an estimate of future produc-
tion increases. The aggregate production of copper, lead, and zinc
has grown rapidly in the po^war period, and recent increases in the
price of silver have offered additional encouragement for the expan-
sion of silver mining. While base-metal production will not neces-
sarily continue to grow so rapidly, increases in silver prices mi^t cwn-
pensate for some slackening in copper, lead, and zinc production. On
the basis of the relatively favorable production experience in the post-
war period, an annual average increase in world silver productitm of
about 3% million ounces might be exped^d in the futuie. In gmenl,
this average increase of 3^ million ounces seems a much better guide
to what may be expected in the future than the much lower 826,000
ounce average increase over the entire period, 1900-63.
Even this higher estimate of future production increases may veiy
well be too low. Table 8, dated October 27, 1964, gives estimatee <kF
new Free World silver production supplied to the Treasury by 1&.
Simon D. Strauss, Vice Preeidmt, American Smelting and Refining
Cranpany, and member of the Silver Committee of the American
Mining Congress. These estimates of the new production of silver
that may take place in the next 4 years were described as o(»isearvative
and based upon projects for which financing was already ccmunitted.
Table 8-A presents estimates made on the same basis but at a some-
what later time by Robert O. Hardy, President, Sunshine Mining
Company, and Chairman of the Silver Committee of the American
Mining Congress. 'Hiese estimates of the new production of Edlver
from knowledgeable industry sources should be more accurate, over
the timespan to which they refer, than any mechanical projection of
pa^ experience. Furthermore, the Strauss and Hardy estimates
receive support from the fact of a 7 million ounce increase in Free
World silver production during 1963. Preliminary data suggest that
a much smaller increase of only some 2 million ounces may have
occurred during 1964. The Strauss and Hardy estimates, if they
were realized, would mark a fairly significant departure from postwar
production experience, but would do very little to close the large gap
between Free World consumption and production.
Digitized byGoOgle
COINAGE ACT OF 106S 201 '
Table 8. — EsUmaie of New Free Woiid Silver Production Expected
m the Newt i Tears
LitcaHon OoaoM 0/
Uulted States : •"wr
Mineral Park 168, 000
Battle Mountain 4S2, OOD
Bast Tlntlc 2, BOO, 000
Blngbam Canyon — : TBO, 000
Hat Head 1, 000, 000
800.000
117,000
600.000
1, 500. 000
C^itral and South America..
Conaolidated Mogul 680.000
Northgate 1, 100. 000
600,000
Mount Isa 6, 800, 000
Marinduane 1, 600,000
Te Aroha 70, 000
Total T, 870. 000
Canada:
Texas Gnlf Sulphur 7. 780, 000
Oranduc — - 750,000
Brunawicb-l 2, 500, 000
Western Copper 570, 000
Lake Dufaolt 1. BOO, 000
Total IS. 070, 000
8UHUABT
United Statea 7,267.000
Mexico 1,000.000
Central and South America 1,000.000
Eurc«ie 1. 650. 000
7.870.000
(•)
Canada IS, 070, 000
Total 81, 867, 000
o cbinge.
■dbyGOOgIC
202 COINAGE ACT OF I9«B
New foreign silver production in the next 4 years would amonnt to
about 25 million ounces according to Table 8) and to about 30 million
ounces according to Table 8-A. A net addition of this size to current
production would be greater than the gains that have been made in
recent years, although not drastically out of line with foreign produc-
tion increases in the nud-1950'&. Between 1949 and the present time,
tile 4-year moving total of increases in foreign production has been as
high as 29 million ounces in 1949-53, and as low as 1.6 million ounces
in 1959-62.
Tablb 8-A. — Eatimaie of New Free 'World Sther Production Ex-
pected in the Next 4 Years
LocatlaH Omtcet «/
Unibed States: anver
Minefal Park 168. 000
BatOe MonnUin 4S2, 000
Bast Tintic 2, 500, 000
BlDKham Caafon 750, 000
Flat Head 1, 000, 000
Wah ChaDg MO, 000
Blue HiU 117. 000
Missouri licad Belt ^ 500,000
Twin Buttes 1, BOO, 000
SUver Summltt 1, 000. 000
8,267,000
Mexico 2, 000, 000
Other America : E. Mocliito 1, 000, 000
Peru:
Oerro 1. 600, 000
Macliieala 600,000
Kiowa 200,000
Areata 360.000
QnimvUca 260,000
Europe:
Consolidated Mogul—
NorUiKate
Australia :
Cobar
Mount Isa..
■dbyGoogIc
COINAGE ACT OP 1966 203
Tabu: 8-A. — Estimate of New Free World Silver Production Ex-
pected in the Neat 4 Years — Continued
LoealUm OtHtcet 0/
Southeast Asia :
Canada:
Texas Gntf Sulphur
1.570,000
7,760,000
Brunswick
Grand total (approximate)
18,270,000
38,000.000
The projected 7- to S-million-ounce increase in U.S. production dur-
ing the next 4 years may be slightly more difficult to achieve. Ko sus-
tained increase of this magnitude has occurred in U.S. productitm
during the postwar period. However, there is reason to believe that
some increase in U.S. silver production will occur within the near
future, possibly on the scale envisaged in the Strauss-Hardy projec-
tions. A study of the silver situation prepared last year in the Depart-
ment of the Interior projected an increase in U.S. silver production of
about 1 million ounces per year, reaching a level ot 41 million ounces
by 1970. While swnewhat below the increases suggested by Strauss
and Hardy, the Interior estimate is essentially consistent mih them in
anticipating some increase above the plateau upon which U.S. silver
production has remained for more than a decade. On the other hand,
the Interior study projects only an 18-million-ounce increase in world
production by 1968, about half the amount anticipated by the Ameri-
cwi Mining Congress.'
U.S. Silver Production
Needed increases in silver production will undoubtedly have to cmne
very lai^ly from outside of the United States. Table 9 summarizes
the world distribution of silver production in the postwar period.
U.S. production of about 60 million ounces in the period inmiediately
following World War I was some 30 percent of world production.
The U.S. proportion of world output had fallen below 25 percent after
World War II and it has fallen further to less than 20 percent at the
present time. Separate discussion of the U.S. industry could hardly
* It U nodentood thit the Interior atady wU! be pabllahed u iDfonuatloii ClreoUr S2ST.
DigitizcdbyGoOgle
204 coiNAaE ACT OF iftes
be justified on the basis of its importance in the world supply picture.
However, there are much fuller and more dependable statistics avail-
able aa U.S. production than there are on most foreign sources of
production. These statistics throw some light on the respective im-
portance of the price of silver and the output of the metals with which
silver is found.
Table 9. — Free World Prochiction of Silver hy Countrieg, 194S-6£,
195S-57, and 196£
a™^^,
. ^^.
ProdnoUoa, Um
Coantry
^
loUl
Intboa-
flnatroy
tOUl
S
Mtal
Auatralja-
10,560
6,998
21,064
50,083
13, 322
39,246
24,715
6.4
4.2
12.7
30.2
8.0
23.6
14.9
14,222
5,987
28,931
45,191
22,164
37,450
34,223
7.8
3.2
15.4
24.0
11.8
19.9
18.2
17,260
3,760
30,669
41, 249
36, 017
36, 345
37, 816
8. A
Canada
16.1
United States
17.9
Total, Free Worid...
165, 956
100.0
IS8, 168
100.0
203,106
100.0
Bdune; Animal StptrU ofUu lMrt€tor v/tht MM.
The basic data are presented in Table 10. The variations in pure
silver production of column 2 do not seem to bear any simple relatJcm-
ship with the silver prices of column 4. Practically all of U.S. pure
silver production is located in the Coeur d'Alene region of Idaho and
most of it in one mine — the Snnshine. Changes in production some-
times have been due to special reasons not directly connected with the
price of silver. For example, there were fairly lengthy interruptions
of production at the Sunshine Mine because of labor disputes in 1962
and 1963. These could have prevented the appearance of producti<m
increases encouraged by higher silver prices. An even more basic
limitation of the price and output data of Table 10, as guides to the
price- sensitivity of silver production, is the fact that silver prices had
been approximately constant for a decade, until they began their ^arp
increase late in 1961. Some time may have to elapse before the effect
of ri»ng prices is fully registered in production increases.
Average gross hourly earnings in metal mining rose by about 100
percent between 1947 and 1961, while the price of silver rose by only
30 percent. Productivity in silver mining can hardly have rism
rapidly enough to prevent a continuing squeeze on profit margins.
Digitized byGoOgle
COINAGE ACT OF l«(tS
Table 10. — United States Silver Production hy Type of Ore and the
Price of Refined Silver in New York^ 1947~6S
Y»
Total dntpro-
ss
amrtmiidlii
«ur
1847
38.6
39.2
34.9
42.3
39.0
39.8
37.7
35.6
36. S
38.7
38.7
36.8
23.0
36.8
34.9
36.3
35.2
10.0
10.6
8.3
14.0
12.8
12.6
11.1
14.1
11.1
11.3
12.5
15.1
10.3
13.8
13.7
11.9
11.7
28.6
28.7
26.6
28.3
27.1
27.3
26.6
21.5
25.4
27.4
26.2
21.7
13.0
23.0
21.2
24.4
23.5
71.82
1953
85.19
I9SS
80.10
tgs9
91.20
1962
108.37
Whether or not a widening of profit mai^gins could achieve much of
an expansion in pure silver production is uncertain, but the possibility
cannot be entirelj disregarded. Higher silver prices in the tnid-1930'8
were followed b; sharp expansion in n.S. «lver production from
precious metal ores, although the paralleling increase in the price of
gold at that time was also an important influence. In any case, the
absolute magnitude of any future U.S. production increases from
pure silver mining cotdd not be very great relative to total require-
ments.
While the data of Table 10 do not reveal much evidence of the in-
fluence of price upon silver production, there is clear evidence of the
importance of the byproduct character of most silvw production. An
index of the silver found in association with other metals, computed
from column 3 of Table 10, is plotted in Chart 2 along with an index
of the aggregate U.S. output of copper, lead, and zinc These series
fluctuate together very closely because of the conditions of joint sup-
ply under which about two-thirds of TJ.S. silver output is produced.
In addition to the close fluctuation of the two indexes, it ts interesting
to note the overall decline in silver ouput relative to copper, lead, and
zinc ouput. A falling ratio of silver per ton of base-metal production
means that increases in silver price may be necessary simply to keep
silver's contribution to $1 of total revenue at a constant level. Under
such circumstances it does not seem at all likely that moderate in-
■dbyGoogle
206
COINAGE ACT OF 1965
creases in silver price would give any net stimulus to base-metal
mining.
If this observed decline in the amount of silver found with base
metals should continue, the effect on overall silver output could be
sizable. It is quite conceivable that silver production could fall in
absolute terms even though silver prices were rising, if the yield of
silver per ton of base ores were to decline at all rapidly. Statistics
for silver mining outside of the United States are inadequate to deter-
mine whether or not there is a worldwide trend toward lower silver
yield in byproduct situations. Scattered evidence and geological
considerations suggest to some observers that there may be such a
trend. If there is, and if it should become pronounced, the outlook
for any continued expansion of world silver production woidd be much
less certain. Major dependence would then have to be placed upcm
the effect that higher prices could exert on pure silver mining, an effect
for which there reallr is not much direct evidence at all.
ISO ,
140 .
U.S. copp«r. lead, and ilnc produecign
130 -
120 ,
l^
110 ,
Si
IKDBX "0 -
7-49-100 90 .
"^'"-^^^^■~~~T--~^^^^^sX;^^
X
/
^""""^
80 .
/ \/'^
\
V,
r-~..^y^
70 '
60 .
(
\
J
50
AO
wlefi oHIer macali.
V
30
20 .
,10 -
4
48 ^9 50 ;i 52 S'J i4 55 S6 57
~i8*
si «
6^' e:
The Influence of Silver Price Upon Consumptton
DiscussifHk of the probable influ^ice of silver prices upon noncoin-
age demand can be quite brief. Statistical information that bears
directly upon the issue is very limited in its lange and coverage. The
available statistics can be supplemented to some extent by descriptive
material on new uses for silver, tlie extent to which rising silver prices
are said to encourage economy in tlie use of silver, etc. Wliile of scone
value, this descriptive material is not overly enlightening as to the
actual effect that rising prices would exert upon consumption.
Digitized byGoOgle
COINAGE ACT OF 1965 207
The chief influences upon silver consumption in the postwar period
appear to have been (a) growth in the ike of silver as a consequence of
rian^ consumer income, (&) changes in t^e industrial conBumption of
silver as a consequence of new uses, and (c) the dampening effect upon
the growth of demand exerted by increases in the relative price of
silver. U-S- silver consumption, aside from coinage demand, has really
shown only very moderate overall growth during the postwar period,
although a very large increase in consumption did apparently take
place during 1964.
The statistics on U.S. silver ccntsumption presraited earlier in this
section pointed to considerable expansion in rejatively newer uses,
such as batteries and electronic and electrical components, but this
expansion has been just about matched by decreasing uses in silverware
and jewelry, while photographic uses have been relatively constant.
The consumption statistics suggest that the declines in the more tnujir
tional uses of silver be^an before the increase in silver prices during
1961, but price increases undoubtedly intensified these reductions in
consumption. In the 3 years, 1961-63, oventU consumption of silver
in this country for noncoinage purposes remained relatively constant,
before increasing by about 12 percent in 1964.
Foreign consumption of silver experienced a very rapid growth
phase in the postwar period until 1961. Between 1953 and 1961, the
industrial use of silver outside of the United States approximately
doubled. Most of this increase in consumption is undoubtedly attrib-
utable to rapid increases in income in Western Europe and Japan.
Foreign consumption of silver showed a tendency to level off in 1961,
just as it did in this country. Subsequent upward revisions in the
data on foreign consumption now credit 1962 Euid 1963 with small
increases, but much below the earlier rate of growth and the increase
that took place during 1964. It seems reasonable to believe that rising
prices for silver have exerted some influence in dampening foreign
demand. From 1953 to 1961, the increase in average monthly silver
prices in London was a little less than 8 percent over all. Practically
all of this increase occurred in 1955, and from 1955 through most of
1961, the London price of silver was almost constant. Therefore, the
marked postwar expansion in foreign consumption occurred at ap-
proximiUely constant prices. In 1964, when silver prices levied off,
foreign industrial consumption of silver rose by about 15 percent.
The relative constancy in consumption of silver in 1962 and 1963
very probably was the resultant of opposing forces; the continued
growth in income and output that would encourage more use of silver,
and tile higher price of silver that would encourage less. It is un-
certain whether or not further price increases, similar in magnitude
to those since 1961, would continue to offset the rapid growth in con-
sumption that would otherwise occur because of rising incomes and
■dbyGot^lt
COINAOE ACT OP 1905
new uses. However, the assumption of slow growth in ccmsumptitm
of silver in physical tenns as a consequence of trend growth in income
and rising relative prices of silver does find srana support in receid
Projective Levels of Silver Price in a Free Market
This concluding section considers the danger that within a few
decades the market price of silver might reach the hi^er monetary
values associated with various hypothetical reductions in the silver
content of the existing coinage. Major reliance is placed upcm an
lamination of the degree to which a given level of higher prices ioe
silver would be successful in removing the excess demand that pre-
vails at the current price of $1^9+, and in keeping silver markets
in balance thereafter. This examination of silver supply and dmiand
draws upon the earlier analysis of the factors that influence silver
production and consumption. It does not lead to absolutely definite
conclusions and there may also be SOTne value in a more direct i^
proach. Therefore, initial consideration will be given to what a direct
extension of the postwar trend in the price of silver would imply
for coinage alternatives.
Monthly average New York silver prices are plotted in Chart 8
from 1915 through 1964. The monetary values of U.S. coinage of the
existing thickness and diam^«r for 800, 700, 600, and 500 fineness,
taken from Table 6, have also been drawn on the chart. It appears
frcan inspection that if silver prices were to continue something like
their postwar increase, which really can be said to date from the de-
pression low of 25^ silver, a level of $2 an ounce could very ea^y be
reached within the next two decades.
The general level of world costs and prices has moved upwards
during much of the postwar period, and it could be si^ed that con-
tinuation of an upward movement of similar proportions is less likely
in the future. If so, one factor that has contributed to postwar in-
creases in the pries of silver will be lessened in influence. On the
other hand, there may be reason to believe diat future supplies of
silver will be available at increasing real cost because of the stea^
depletion of known resources and the accompanying need to intensify
expensive exploration effort. In such a case, silver prices would he
expected to rise relative to a general index of commodity prices. A
judgment on this latter'score is difficult enough ; the byproduct nature
of two-thirda of silver production complicates it further.
Extensicm of past price trends is obviously a very crude forecasting
technique. For that matter, the accurate forecasting of a commodity
price two decades in the future by any technique whatsoever is not
within the realm of possibility. In the present case, however, the
question is not so much the single most probable value for the price of
82
DigitizcdbyGoOgle
ooiNAaB ACT or ISSS
Digitized byGOOgIC
210 COINAOB ACT OF 1965
ffllver in, say, 1986, as whether there is reason to believe that by that
time the price of silvra could have reached the various monetary values
drawn in on Chart 3. The postwar trend of the price of silver doeff
suggeert^ that an increase to ^ an ounce, within the next two decades
or so, is far from impossible. Unless the analysis of supply and de-
mand can point decisively to faot«»« that promise to hold the price of
silver well below its postwar trend rate of increase, it would seem
that 800, 700, and evm 600 silver contrait should definitely be ruled out
as loDgrun solutions to the coinage problem.
The alternative to direct projection of the apparent trend in the
price of silver is a consideration of the factors bearing upon the supply
and demand for »lver. The more important of these factors have
already been discussed and it is only necessary now to pull together
earlier conclu^ons and apply them to the question at htuid. There
would, in general, seem to be three major detenninants of the extent
to which silver prices would rise in a free market. The first is the
initial size of the excess demand that will exist at the market price of
$1.29+ when prices are permitted to rise. Excess demand will con-
tinue to exert upward pressure on price ui^il it is eliminated l^
adjustmetits in consumption and production. The second d^»rminant
of the price rise that would be required to bring silver markets into
balance is the net effect over time upou silver production of rising
^ver prices and trend growth in the production of metals with whic^
silver is found. The third determinant is the net effect over time
upon silver consumption of higher silver prices and trwid growth in
consumer income and the industrial output in which silver is used. An
omitted factor of some consequaice on the supply side is the supple-
ment to current production that woidd be forthcom ing at various price
leveb from existing stot^ of silver. This omission is probably leas
serious where longrun trends in prices are at issue, than it would be if
the intent were to forecast prices a few years ahead.
In holding the free market price of alver at $1.29+ an ounce the
Treasury acts as residual supplier to the world ^Iver market. C<Hi-
sequently, the amounts that the Treasury is obliged to supply to the
mark^ are one measure of the excess demand — speculative and non-
speculative — in the market at $1.29 + . Since the Treasury has ffltily
been holding the line at $1.29+ for a relatively short time and be-
cause of the presence of transitory speculative demands, it is quesdcm-
able how accurate an indication of the behavior of excess demand over
time one can gain from this source.
An alternative approach is to subtract U.S. coinage demand fnnn
the Free World production deficits presented earlier in this sectim.
The results are shown in Table 11. They suggest a "normal" annual
deficit from 1949 to 1958 of about 25 to 35 million ounces, mrt irom a
range of sources other than current production. The price of ^ver
Digitized byGoOgle
OOINAOE ACT OF !965 211
was approximately constant during this period. During 1959 and
19^ the residual world deficit increased about 40 million ounces above
the earlier level. In 1961 there was a further increase of about 40
million ounces, some of which may have represented speculative de-
mand in anticipation of the halting of Treasury sales of free silver.
While deficits decreased somewhat in 1962 and 1963 as the price of
silver rose to $1.29 + , they remained well above pre-1959 levels. In
1964, the deficit increased by about 40 milli(m ounces. As in 1961, this
probably reflected some inventory accumulation in anticipation of an
increase in the price of ^Iver. This suggests that aside from ^tecula-
tive demands, which could be expected to cany Treasury redemptions
to much higher levels, there may now be excess demand of a "perma-
nent" sort amounting to perhaps 75 million ounces at the current price
of silver.
Tabia 11. — Free World Silver Production Deficit, UJS. Coinoffe
Demand, and the Residual Deficit, 19^9-6^
[In mlUlons of fine tror ontices]
Indlated
prodQcUon •lefldt
''i^r
iUsl<lD>l<tefldt
-83.9
-72.8
-64 2
-110.9
-121.6
-173.8
-leas
-205.4
-334. 9
36.5
37.6
38.2
41.4
46.0
S5.9
77.4
111.6
203.0
1962
91. 1
1904
131.9
What size this underlying deficit would be after a transition to
coinage of reduced silver content is conjectural. Resumption of any-
thing like earlier rates of growth in foreign ccmsumption of silver —
and the apparent increase in 1964 was very large — could easily cause
annual excess demand to increase to 100 million ounces or more in a
few years. However, the more conservative course may be simply to
estimate the market gap at 75 million ounces.
How readily could this 75 million ounce gap be closed from the
production side ? The postwar trend increase in silver production is
only Zy^ million ounces a year; its continuation would do practiwilly
nothing to close the gap and dampen the upward movement of price.
The Strauss-Hardy estimate of an 8 to 10 millicoi ounce annual net
increment to world silver production includes whatever may have been
the stimulating effect of the increase of more than 40 percent in sUver
Digitized byGoOgIc
212 COINAQE ACT OF 196S
prices between Iftte 1961 and 1963 and the generally improred out-
look for primary metal output at the preeent time. That production
estimate may prove to be an accurate one, but it is far frwo dear to
what extent a higher price of silver accounts for the increase, or how
long one could count on sustained increases in silver productimi of
this size.
It is even less clear to what extent, if any, excess demand could also
be closed from the consumption side. The statistical information is
meager and firm conclusions are very difficult to readi. There is no
doubt that, other things being equal, steadily rising silver prices would
reduce the volume of silver consumed. But world incomes will be
rising and the potential for new uses of silver is said to be ctmsiderable.
If the consumption of silver were to remain approximately cfMistant
because of rapidly rising silver prices while producti<m grew at some-
thing like 8 million ounces annually, excess demand would be nar^
rowed in time, but the potenti^ rise in the price of silver would be
very great. Indeed, so long as any excess demand were chronic, silv«
prices would be likely to rise, although not necessarily at a steady paoe
because of the intermittent appearance in tJie market of ^ver drawn
from existing stO(^
The price of silver rose more than 40 percent in 2 years between late
1961 and 1963 and was only stopped by the U.S. Treasury redemption
ceiling. Excess demand seems to have been about 70 million ounces,
and this gap was only slightly reduced, if at all, by the increase in
price. There are now some signs of a lagged response of productimL
Consumption growth was slowed a little, but only t^nporarily. It
is extremely doubtful whether recent experiraice offers any assurance
whatsoever that silver prices would remain below $2 in the next two
decades. Indeed, it is not at all difficult to contemplate price rising
much farther. It is very hard to rule out the possibility of a dou-
bling or even a tripling in the price of silver unless it can be shown that
a higher price of silver would cut back the consumption of silver ap-
preciably from present levels, A basic difficulty is that the silver sup-
ply-demand situation has been changing very rapidly in the last half
dozen years, so rapidly that little basis exists upon which to estimate
with much assurance the independent effect of silver prices upon
consumption.
In the last analysis, it is the uncertainty as to how high silver prices
might rise within two decades that argues most strcmgly against
reducing the silver content of the coinage as a longrun solution to the
coinage problem. That uncertainty could certainly be held to rule
out 500 fineness as well as the higher silver contents. This is a ques-
tion of judgment. No one can be sure that the price of silver would
not double in the next two decades and reach the melting point of 500
fine silver coinage. This does seem somewhat less likely Uian the possi-
Digitized byGoOgle
COINAGE ACT OP 1965 213
bility that price would reach or exceed $2. Longrun supply and de-
mand factors are not the only reason why silver coinage of 500 or lesser
fineness may be unsuitable as a longrun solution. On the basis of IcMig-
ron mark^ fectors alone, silver coinage of 500 fineness is not abso-
Intely ruled out, although the case for it is seriously weakened even
witiiout reference to the difficulties of the transition period. Its
advantages and disadvantages from a technical and a metiUlurgical
point of view will be considered subsequently altxig with those of a
range of other possible allojrs.
Ail of the discusfflon to this point has assumed that U-S. coina^
demand could be met in the foreseeable future from official stocks of
silver remaining at the end of a transition period, possibly supple-
mented by recovery of old coin. The validity of such an assumption
is highly questionable. In the course of its investigation, Battelle
made drtailed projections of the rates at which Treasury silvnr would
be exhausted on various assumptions as to silver content and coinage
requirements. With 60 percent silver content, Battelle predicted that
Treasury silver would be entirely exhausted somewhere between 1969
and 1975, if not beforeL If it were to prove necessary fco* the Treas-
ury to add its own demfuid to that of the market, t^re can be little
doubt that the price of silver would rise well above $2 during the next
two decades. Indeed, once Treasury stocks were exhausted, the pros-
pect of keeping any silver coinage in circulation would not be at all
bright.
Conclusion
1. Recent years have seen the development of an enormous gap
between Free World production and consumption of silver. Tlie
overall deficit, inclusive of coinage demands, was over 200 millicHi
ounces in 1963 and almost 340 million ounces in 1964. Even if all
coinage demands, n.S. and foreign, are subtrad»d, a deficit remains
although relatively modest in size.
2. U.S. Treasury stocks of silver declined to 1,218 million ounces
by the end of 1964 and will decline further to 1,000 million ounces or
less by mid-1965. Legislative action on a new coinage system is essen-
tial while Treasury stocks of silver are still large.
3. On the basis of past experience, higher silver prices and increases
in base-metal production promise to increase world silver production.
The independent influence of higher Mlver prices cannot be estimated
with any precision, but there is no reason to doubt that substantially
Idgher prices would lead to some expansiwi in silver output. Unfor-
tunately, the current production deficit is so large that it cannot be
closed from the production side.
4. During the last 16 years, most of the growth in the industrial
consumption of silver has occurred in foreign countries; U.S. msisump-
tion has grown more slowly. There were some signs that the recent
Digitized byGoOgle
214 COraAGE ACT OF 1965
increase in silver prices had <iieck6d the oTerall growth in world indufl-
trial use of silver, but only temporarily, and 1964 found silver con-
sumption increasing sharply both here and abroad.
6. A simple extension of the postwar trend of silver prices suggests
that $2 an ounce might easily be reached by 1980 or 1986. Analyas
of supply and demand factors does not yield any precise estimate of
the level that silver prices might reach in a free market. The anal-
ysis does suggest that there is a vecy appreciable risk that price could
reach $2 an ounce then, or even much soon^. Battelle's detailed
quantitative projections of the rate of exhaustion of Treasury stocks
lead to an even more pessimistic appraisal since with 50 percent ^ver
content they can foresee the complete exhaustion of Treasury silver
as early as 1969.
6. In view of these considerations, it does not appear that reduction
of silver content to 800, 700, or 600 fineness would amstitute a longnm
(20- to 25-ye&r) solution to the coinage problem. On the basis of
longrun supply and demuid factors, silver coinage of 500 fineness is,
perhaps, not definitely ruled out, although there certainly is substan-
tial risk that a rising market price of silver would soon imperil coin-
age of BOO fin^ess. That risk would be overwhelming even for lower
silver contents if future U.S. coinage demand could not be met delu-
sively from Treasury silver holdings.
■dbyGOOgIC
COINAQE ACT OF 19S5
IV. Metallurgrical and Teehnical Characteristics of
Alternative Coinage Alloys
This secticHi of the discussion is concerned with the metallur^cal
and technical characteristics of the various coinage alloys that mi^t
replace ralver of 900 fineness in a new cmnage system. The objective
. is to narrow the field of possible coinage alloys to tiioee which are
acceptable frc»n a metallurgical and technical standp(nnt. It will
then be possible to deal more effectively with problems of the traj)^-
titm to a new coinage system.
The analysis of the preceding 9ecti<»i has led to the elimination of
diver alloys of more than 600 fineness because of the prohibitiTe risk
that the market price of mlvar would reach, or exceed, $2 an ounce
within the next 20 years tn* so. The metallurgical and technical char-
acteristics of silver alloys of 500 fineness remain to be considered
along with those of a fairly wide range of base alloys. In addition,
there are possibilities in the form of composite coinage materials vnih
silver or base alloy outer layers clad on an inner core. These will be
discussed in the course of the present section. Intensive analysis of
the technical and metallurgical characteristics of theee clad materials
will be found in the Battelle study, and the Mint has, itself, been con-
ducting an exhaustive investigation of the feasibility of the use of
clad material in U.S. coins.
The alternative alloys are taken up in alphabetical order and any
material that has been seriously proposed to, or by, the Treasury
receives at least brief consideration in the course of the discussion.
Ija the interest of brevity, attention is chiefly concentrated upon those
alloys that seem to show promise. Except in the case of fewmoterials
which are readily eliminated because of some glaring deficiency, each
coinage alloy is considered under five general headings. Iliese are :
Public acceptability, operation in vending machines, coimterfating
potential (including the use of blanks uid foreign coins in vending
machines), ease and certainty of production, and cost and availability
of raw material& Results of the discussion under Utea^ headings ue
Bummarized in Tables 1 and 2, at the end of Qaa section, whidi show
acceptable and rejected coinage alloys separately.
■dbyGOOgIC
216 COINAOE ACT OF 1966
Alnmltmiii
Public Acceptability
Aluminum coins are unlikely to be acceptable to the public. Para
aluminum is very light in weight with a density of 2.7 gramB per cuIhc
centimeter, in contrast to a density of 10.8 for 900 fine silver. Alu-
minum is ftlso very soft. It could be hardened by the addition of
manganese but its weating qualities would still be relatively poor.
Aluminum can be [HXKxesed so as to produce different colorad coins
but this seems unlikely to increase its chances for public acceptance.
Foreign coinage use of aluminum is chiefly limited to low dentnnina-
tions. There are some examples of use by developed industrial oonn-
tries; namely, Austria, Italy, and Japan. On balance, it would seem
that aluminum would be rated very low in acceptability hy the public
if proposed as the basic alloy in a new coinage system. It is eaa.-
oeivable that an aluminum 1-cent piece would be acceptable to Hm
public, but its use in high denominations lacks precedent etewhera
and probably would encounter strong public opposition.
Operation in Vending Machines
Pure aluminum has an electrical resistivity of about 2.7 microhms-
cm. This is close to the 2.1 resistivity of 900 fine silver and the 8.1 of
the present 1-cent piece. However, current vaiding machines depend
not only upon coins being nonmagnetic, of proper size, and of appro-
priate electrical resistivity ; they also depend upon coins bung of a
certain minimum weight in order to roll properly and they use a
bounce test for hardness.^ Aluminum coins fall below minimum
weight requiremraits and existing vending machine rejectora cannot
easily be redesigned to handle lightweight coins. Furtbermorei, if
manganese were added in order to harden aluminum coim, thor
electrical resistivity would be raised well above that of the preeeid
1-, 10-, 25-, and 50-cent pieces. Undoubtedly, some rejection t^
paratus could eventually be designed to take aluminum coins and
reject other alloys. No such apparatus is available now and no one
is known to be working on the problem.
Counterfeiting Potential
Unless aluminum coins were to receive some special procesenng, Uie
potential for counterfeiting would seem to be very great. Shert alumi-
num is readily available and the manufacture of coin blanks would
not be difficult at all. The metal is soft and would take impressions
readily from counterfeit dies. If the dies were of high quality, the
minting of aluminum counterfeits might become a problem of some
proportions.
*31i« belt ilngle parameter fa tlila eonneetlon I* probaU; the inttdact of an ■Iloj'l
eleetrleal realatlvltT and Iti denKltf. Tbronghont mait <rf the enialng dlacanlon that
deals with TcndlDf madUoe ofwratloo, atteotlM 1* eonllned to deetrieal realatlTltT bMaaa*
the daniltlM of ellciMe coliuve aUOTs do not T«rj wldralr<
Digitized byGoOgle
COINAaB ACT OF 1966 217
Aside from the tiireat of direct counterfeiting, aluminnm blanks
would probably pose a real problem for the vending machine industry.
Rejectors might eventually have to be equipped with some sensing
device by which blanks could be told from coins. This would un-
doubtedly prove to be difficult and expensive.
Ease and Certainty of Production
Aluminum is a very easy material to work and over the long run
it probably would not present any difficult minting problems. The
Mint has had no production experience working with aluminum,
but experimentally it has been established that present techniques
could be adapted readily to the fabncation of any material as soft
as aluminum.
Coat and Availalnlity of Raw Materials
Alumintun is cheap with a domestic market price of 24V^ cents per
pound for unalloyed primary aluminum ingot. Mint requirements
would be tiny in proportion to U.S. annual consumption of aluminum
otsome 3 million short tons.
Conclusion : itq'ected as possible coinage alloy.
Reasons: Lack of public acceptability, vending machine, and
counterfeiting problrans.
Colnmbinm
Public Acceptability
Columbium has been proposed as a coinage material in the SO-cent
piece and as a cladding material. The density of colnmbium is 8.57,
just a little less than copper (8.96) and nickel (8.90). The color is
gray, the ring is about the same as with silver, and the material is
tarnish resistant Wearing qualities should be appreciably better
than those of silver coins. Public acceptability, as with any "exotic**
material, is stnnewhat imcertun.
Operation in Vending Machines
Very little work has been done on the adaptation of vending mach-
ine rejectors that would be required with a pure columbium coin, or
a columbium aUoy. In theory, there would not appear to be any
insuperable difficulties but practical experience is lacking. Colum-
bium is fairly heavy and it is ntmmagnetic. Its electrical resistivity
is in the range of 12.5 to 16.0 microhms-cm, depending upon tempera-
ture. This compares with an average resistivity of 2.1 for 900 fine
silver and 32.0 for cupronickel (the alloy in the 5-cent piece).
There have been experiments with powder metallurgy techniques
in an e£Fort to develop a columbium alloy which would work in exist-
ing vending machine rejectors without any alteration being required.
However, at the time of writing, these efforts had not progressed much
Digitized by Google
218 COINAGE ACT OF 1966
beyond the experimental stage and had not achieved the required
degree of success irndw operating conditions.
Counterfeiting Potential
Colnmbium coins would be very difficult to imitate with any mattt-
rial of relatively low value.
Ease and Certainty of Production
The melting point of columbium is exceptionally high — 1,474° F.
to silver's 1,760" F. Columbium strip would have to be purchased
frtMn suppliers, or the Mint would have to acquire new equipment.
It is said to be a very ductile material which does not work-harden
when cold fabricated. The Mint should be able to make coins from
purchased strip of columbium, although costs of fabrication would
be smnewhat greater.
Cost and Availability of Raw Materials
While fairly acceptable from other points of view, the cost of
columbium is prohibitive. A price of $20 to $35 an avoirdupois pound
was initially mentioned to the Treasury but a price range of $36 to
$60 is quoted in the Americam. Metal Market. Even the $20 to $35
price is well above a current price of $18.81 for silver. It is conceiv-
able that on a large guaranteed coinage demand unit costs might be
reduced to, or below, $10 a pound. This would still be a very expensdve
coinage material.
There has been no U.S. mine production of columbium ore in recent
years. About 60 percent of U.S. imiports of columbium concentrate
are from Canada; the rest are rather widely dispersed. Domestic
stocks of concentrate and ingot are fairly sizable relative to demand
for the metal but it is estimated by Battelle that it would take 2 to 8
years to expand production appreciably. Furthennore, coinage re-
quirements would apparently be very large relative to current wrn-
sumptioD of the metal and large relative to the national (stirategic)
stockpile.
Conclusion : Rejected as possible coinage alloy.
Beasons: High cost and uncertain supply outlook. Not
accepted in present vending machines. Mint cannot falnicate
with existing equipment.
75 Copper-S Nickel (Cnpronlckel)
Public AcceptablUty
Ct^»(MUckel is the alloy presently used in the U.S. 6-cent piece and
the most widely used coina^ material in the wco-ld. The weight is
good with a density of about 8.6 in ccmtrast to a density of 10.S for 900
fine silver, and about 9.6 for 500 fine silver. A cupronickel 36-cent
piece would weigh 6.S7 grams in contrast to 5.83 grams f<a- 500 fine
Digitized byGoOgle
COINAGE ACT OF 1666 219
wlv«e, and 6.2S grains for the preeent 900 tine 25-cent piece. The
colcH' ia v&y good. Oupronickel does lack the luster of coin ^Iver
when the silver is untarnished. Also, its ring is not quite so impres-
sive as that of the existing silver coins. However, a cupronlijEel coin
ages well and its physical wear characteristics are very good — appreci-
^ly bettra- than those of silver.
Cupronickel coinage has been used for relatively high denominatim
coins in the United Kingdom and has circulated side by side with silver
coinage. Smne objection to the use of cupronickd here would be
lodged by individuals and groups who, for one reason or another, favor
coinage with high intrinsic value. However, this sort of objection,
would be encoui^ered if tuiy base alloy were proposed for use in the
10-, 26-, and 50-cent pieces. It should be countered by insistence that
under modwn conditions high intrinsic value in subsidiary coinage
tends to interfere with, rather than facilitate, performuice of the
essential medium of exchange function.
A question arises as to the role of the present 6-c«it piece in a cupro-
nickel system. Continuation of the 5- and 10-cent pieces in their
preswit dze and diameter, which probably is desirable, would lead to
the anomaly of a 5-cent piece larger than the 10-cent piece, but made
from exactly the same material. Opinions will differ as to whether
this is important, but it is possible that some other material should be
used for the S-cent piece if cupronickel were to be used in the sub^di-
ary dwiominations.
Operation in Vending Machines
Cupronickel has a resistivity of 32.0 microhms-cm., which is well
ahove the 2.1 resistivity of 900 fine alvw. Because existing rejectors
are ccaistnicted to accept cupronickel 5-cent pieces, no unusually dif-
ficult-problems are encountered in making a rejector thfU; will accept
cuprtmid^el subsidiary coinage along with silver subsidiary coinage.
The National Rejector Company has built a prototype which accepts
cuprtmictol and silver 10-, 26-, and SO-cent pieces — NBCO 8000 Series
Model X The estimated factory cost of this new rejector, not cur-
rmtly in production, is $20. ITiere are now about 4.5 millitm NRCO
r^ectors in service of three different series — 4900, 5800, and 8000
regular. Many of theee could be modified, at the factoiy or at a
branch service facility, to accept existing silver coins and a new cupro-
nickel system at an estimated cost of perhaps $10 each.
It has been estimated by the rejector industry represmtative that
the required changeover could be accomplished within 2 years. Pos-
gnbly it could be made even more rapidly at some increase in expense.
The rejector industry has concmtrated up<»i designing a mechanism
that would accept cupronickel 5-, 10-, and 25-cent pieces. A rejector
such as NBCO's Model X would also accept the existing 6'Cent piece,
but, as mentioned previously, it may seem desirable to use a different
4ft-S88 O— 6B IB , - ,
Digitized by LiOOgle
220 COINAGE ACT OF 1060
alli^ for the 5-ceiit piece if cupronickel is used for subsidiary coinaga
Ko work has been done on the addititmal modification that would be
required if the rejector were to accept a new 5-cent piece and cu^t>*
nit^el 10-, 26-, and SO-cent pieces, along with existing coins. One poe-
Enble way in which that additional rejector modificaticni could be
avoided would be to make the 5-cent piece in a cuprmicket system
frcan nickel-silver (discussed below). The resistivities and other
properties of nickel-silver and cupronickel are close mongh so that
both old and new S-cent pieces would be acceptable in rejectors. On
most rejectors no modification would be required <m the S-coit
channels.
A much more promising resolution of vending machine difficulties
would be to use outer layers of cupronickel clad on a coppw core for
all of the subsidiary denominations. Such coins would work in imal-
tered vending machine rejectors. They are discussed subsequently
nnder the heading of "Other Clad Coins."
Connterfeiting Potential
The direct counterfeiting potential with cupnmickel coinage should
be quite low. Despite its comparative cheapness, cupnmickel is not
readily available from commercial suppliers. There are vending ma-
chine problems with a proposed subsidiary cupnmit^l coinage, but
they relate to the use of foreign coins, or expanded U.S. 5-cen.t oolns.
The problem, in the instance of vending machines, is not so mudi the
potential use of blanks, for they would be relatively difficult to obtain.
The rejector industry representatives do anticipate that a problem
would arise if the U.S. were to switch to cupronickel subsidiary coin-
age, because of the use in vending machines of low-value foreign coins
made from cupronickel. They have furnished a lengthy list of these
coins which are sufficiently close in size to the U.S. 25-cent piece to
operate a rejector mechanism set for a U.S. cupnmickel 25-cetit piece. '
In addition, there is a potential problem with a cuprMiickel systeon
in that the 6-cent piece could be flattened in a hydraulic press or by
some other means and used as a 25-cent piece. Whether or not this
would occur on any significant scale is questi<mable, but it is a further
minor difficulty with a cupnmickel system. This particular difficulty
would not be overcome by substituting a S-c^it piece made of nickel
silver in the cupronickel series since the two alleys have similar elec-
trical resistivity.
Ease and Certainty of Production
The Mint has had long experience with the fabrication and mint-
ing of cupronickel. This is an important consideration where lai^
numbers of coins may have to be produced in a very short period of
time. Cupronickel is a tougher material than silver and is not quite
so easy to mint. However, no unusual problems would be enconntexod
Digitized byGoOglC
COINAGE ACT OF 1966 221
and cupronickel must be rated very high in terms of ease and certainty
of production.
Cost and Availability of Raw Materials
Cupronickel is also very attractive from the standpoint of the cost
and availability of raw materials. Copper at 33 cents a pound and
nickel at 79 cents a pound — alloy cost 45 cents — would be used in place
of silver at $18.81 a pound. Coinage at the projected fiscal 1965 rate
would use approximately 5,355 short tons of copper and 1,785 short
tons of nickel annually. Copper presents no serious supply problem
on a long-run basis, although intermittent shortages and sharp price
movements can be expected to occur at times. Coinage needs would
be a very small fraction of total consumption. The annual amounts
of nickel used would be very small relative to U.S. consumption of
124,500 short tons in 1963.
Conclusion : Acceptable as coinage alloy.
Copper-Zinc Alloy (98 Copper-2 Zinc)
This alloy is red in color luid its use for higher dentHnination coins
does not merit any extended discussion. Along with similar alloys
such as 96 copper-4 nickel, it does have an electrical resistivity simi-
lar to that of silver and could be used in existing rejectors. Some
rejectors, which have been set specifically to reject copper slugs and
cut-down pennies, would require minor adjusbnuit. Copper-zinc
coins could be easily fabricated on existing and planned Mint equip-
ment Because of their red color, they would merit consideration
chiefly as an emergency measiire, if sUver were not available for coin-
age, and necessary vending machine adjustments were not yet com-
plete. It is also conceivable that such an alloy might be used for the
5-cCTit piece if cupronickel were used for subsidiary coinage.
Nickel (Pure)
Pablic Acceptability
Pure nickel has a density of 8.90 approximately the same as cup-
ronickel. It is whitish-gray in color and in mint ocaidition is gen-
erally considered to be slightly more attractive than a cupronickel
coin. Wearing qualities are excellent. Nic^ is being more and
more widely used as a coinage material although often a silver coin
of higher denomination is retained in the series. This has been the
case in Switzerland, Canada, France, the Netliorlands, and Japan.
South Africa has recently announced plans to r^lace its existing
subsidiary coinage of 500 fine silver {reduced from 800 fine in 1961)
with pure nickel coins, while retaining one high-denomination nlver
coin. Pure nickel coins would probably be readily accapted by the
American public The coins are v^^ attractive and more closely
■dbyGoOgle
222 COINAGE ACT OF 1966
resemble silTer coinage than is the case with any of the base alloys,
except nickel silver when it is in mint ccmdition.
(^ration in Vending Machines
Pure nickel is magnetic and existing rejector mechanisms are de-
igned 80 as not to accept' coins which are magnetic. It would be
necessary entirety to redesign Tejector mechanisms so as to be able to
pass magnetic nickel coins but to reject magnetic irtm slugs. While
this probably could be done, it would be very difficult and could not be
done quickly, particularly since practically all coin-operated mecha-
nisms now depend upcm the magnetic principle to some ezt«it, and
many less sophisticated mechanisms depend upon it entirely. The
extent of the problem may be inferred from the fact that the Inter-
national Nickel Company has directed its efforts to the deTek^Mnent
of a nonmagnetic alloy (discussed below) rather than to the modifi-
cation of vcoiding machine rejectors in order to make them capable
of accepting pure nickel coins.
Counterfeiting Potential
Pore nickel coins would be extremely difficult to counterfeit becanae
of the metal's relatively high melting point (2651" F.) and He hard-
ness. There is little basis upon which to assess the potential foe the
use of nickel bhinks, or blanks with comparable electrical reeistivity,
in vending machines since it is not clear what sort of rejectfM* could
be designed to accept pure nickel coins. The electrical resistivity of
pure nickel is 9.5 microhms-cm. No other cwnmonly used coinage alloy
has a resistivity very close to that value althou^ many brasses and
brtmzes, available ccnnmerciBlly, do have similar reedstivities.
Ease and Certainty of Production
Production of pure nickel coins would pose a very difficult problem
for the Mint. Existing brass mill equipment could not be used be-
cause of the high melting point of nickel. The new Mint would have
to be specially designed and/or nickel strip would have to be purchased
for use in existing Mint facilities. The minting of nickel coins would
still be very difficult with existing equipment even if strip were pur-
chased, but it could be accomplished.
Cost and Availability of Raw Materials
Nickel costs 79 cents per pound. The International Nickel C(Kn-
pany has estimated that at fiscal year 1965's projected rate of produc-
ti<m of 10, 25, and 60-cent pieces about 15.7 millicm pounds of nickel
would be required. These requirements would have to be met by im-
IKxts from Canada or from the domestic stockpile. U.S. mine output
comes exclusively from the Hanna Mining Company's properties in
Oregon. In 1968, the nickel content of Hanna's productiim of ferro-
DigitizcdbyGoOgle
COINAGE ACT OF 1965 223
nickel was about 21.4 million pounds but this ferronicke] would not be
suitable for mint requirements.
Ctmclnsion : Bejected as possible coinage alloy.
Reasons: Vending machine problem associated with use of a
magnetic alloy. Otherwise acceptable, although difficult to make
with existing Mint equipment.
Nickel (Inco Alloy 95 Nickel-5 Silicon)
The International Nickel Company has developed an alloy of 96
nickel and 6 silicon which is nonmagnetic, thus removing, at least po-
tentially, the major barrier to the use of nickel in slug rejectors of the
present type. A further effort has been made to modify the alloy so
that it will simulate the properties of 900 fine silver coinage and work
in unaltered coin rejectors.
As one of their tests, existing rejectors roll the coin through a mag-
netic field. A coinage metal such as silver with very low electrical
resistivity is slowed more in its travel, by eddy currents induced as it
passes through the magnetic field, than is a material of higher electrical
resistivity. Silver is a relatively "alow" coin, while cupronickel, for
example, is a relatively "fast" coin. Having removed the magnetism
of pure nickel coinage through the addition of 5 percent silicon, Inco
technicians have sought to restore just such a sufficient degree of wet^
magnetism to the coin as to make it as "slow" as silver. In their most
successful effort, the weak magnetism pulls the coin into contact with
a piece of aluminum oxide tape which retards the rolling coin through
physical friction. Without this retardation the 95 nickel-5 silicon
coin would be too fast, since its electrical resistivity is higher than that
of silver coins. The required magnetism has been sought at various
times by adding a thin core of pure nickel, or a core of 80 percent
nickel and 20 percent iron, to the coin. The 80 percent nickel and 20
percent iron core is now preferred since its magnetism does not vary
within the ranges of temperature that would be encountered.
Despite this, early test results were not entirely satisfactory, and the
feasibility of the Inco approach has never been demonstrated conclu-
sively. According to the rejector industry, on its initial tests the Inco
coin was only successful in fooling rejectors about 70 percent of the
time; 95 to 97 percent success was required in their view. Inco sub-
sequently dunonstrated that slight modification of existing rejectors —
application of the small strip of special tape referred to above — is
capable of achieving a higher success ratio, at least undw controlled
test conditions for a limited number of trials. However, in the judg-
ment of the vending machine and coin rejector industries, even with
the application of the special tape the Inco coin cannot achieve a satis-
factory success ratio under actual operating conditions. Wearing of
the tape and variability in the strength of the magnets in the rejector
43
Digitized byGoOgle
224 COINAGE ACT OF 1965
mechanisms could be expected to create difficult problems in actual
practice. There was a comparable negative finding b; Battelle on the
ability of the Inco coin to work in existing vending machines.
Aside from the technical issue of use in vending machines, comment
on the modified nickel coin can be relatively brief since many general
comments applicable to pure nickel coinage are also applicable here.
Public Acceptability
The public would seem likely to accept the modified coin about as
readily as a pure nickel coin.
Operation in Vending Machines
Discussed above.
Counterf eitins Potential
This would be a very difficult coin to counterfeit, at least as dif-
ficult as a pure nickel coin, and probably more difficult. The use of
blanks in vending machines would present about the same problem as
with existing silver coins since the modified coin simulates silver's
electrical resistivity. Some additional difficulty might arise if it were
not possible to simulate the narrowed resistivity range of 2.0 to 2.6
microhms-cm. that some rejectors are using in order to reject copper
blanks and foreign coins.
Ease and Certainty of Production
It is very doubtful whether the Mint could make the modified nickel
alloy; certainly it would be an expulsive undertaking requiring dif-
ferent eqmpment. Tlie necessary facilities could probably be included
in the new Philadelphia Mint. If the modified alloy were to be used
it apparently would be necessary to buy annealed blanks from Inco,
at least until the new Mint is on stream. It is possible that current
and planned rates of subsidiary coin production could be achieved us-
ing the purchased blanks. Even when annealed the alloy wotdd be
harder than cupronickel, and this makes minting a more difficult task,
but not an insurmountable one. 'Hie material is being patented; ex-
clusive rights to the patent would be turned over to the U.S. Govem-
ment, for use by the Mint or designated suppliers, in the event that the
Mint were to decide to use the material for coinage.
Cost and Availability
Inco has estimated that the coiled strip would cost $1.50 per pound;
this includes a metal cost of about 80 cents per pound. Tlie coinage
requirements for nickel have been discussed above. At the fiscal 1965
rate, about 15.7 million pounds would be needed, rouj^y 6 percoit of
U.S. annual nickel consumpticHi. The overall supply situation is prob-
ably adequate. It is true that nickel was regarded as scarce in the
early IflSO's, and it still is not in such assured supply as copper, for
example.
Digitized byGoOgle
COINAGE ACT OF 1965 225
The Bureau of Mines estimates known Canadian nickel reserves at
6 millicHi tons and describes this as a very conservativB appraisal.
Canada is tiie principal Free World supplier of nickel and has ac-
counted for about 80 percent of Free World producticm in recent
years, and has supplied almost all of T7^. import requirements. Free
World production of nickel was some 270,000 tons in 1963 ; almost half
of this was consumed in the United States. If Free World consump-
tion continued at the 1963 rate, known Canadian reserves would be
depleted in about 25 years. Very large nickel reservee exist in Kew
Caledonia and Cuba; but these should be excluded in determining the
adequacy of nickel supply.
Nickel prices have almost tripled during the postwar period.
Market shortages do not now exist but it cannot be said with complete
assurance that they could not arise within, say, 20 to 25 years. The
possibility that nickel prices could rise during that period so for as to
imperil the subsidiary coinage, as has beeoi the case with silver, is ex-
tremely remote. In this sense, nickel coinage can properly be regarded
as a "permanent" solution; it would offer much less seigniorage than
cupronickel.
Conclusion: Acceptable coinage alloy if consist^it operation
in vending machines could be demonstrated under operating con-
ditions. Could not be fabricated on existing Mint equipment but
coins could be struck at the Mint from annealed blanks.
Nickel Silver (65 Copper-18 Nickel-17 Zinc)
Public Acceptability
Also termed Germui silver, this alloy differs frwn cupronickel by
the substitution of zinc for same nickel and copper. Proporti<ms can
vary but the 65 copper, 18 nickel, and 17 zinc alloy is probably best
suited for coinage use. Because the alloy is fairly close in metallurgi-
cal composition and other characteristics to cupronickel, its advan-
tages and disadvantagee are perhaps best established by direct com-
parison with cupnmickel, where that is possible. Nickel silver is
sli^^tly lower in weight than cupronickel because some zinc with a
density of 7.1 is substituted for nickel and copper with densities of 8.9.
When newly minted, the coin is very attractive wid has a silverlike
appearance, but it develops a yellowish cast as it tarnishes with age,
while cupronickel keeps its grayiah-white color indefinitely. Wear-
ing qualities of nickel silver are also somewhat inferior to those of
cupronickel ; the ring of the two coins is similar. Ni(^el silver is not
very widely used for coinage. Some current examples are Portugal,
Philippines, and Taiwan.
In general, nickel silver must be rated a little below cupronickel in
most of the characteristics that would be likely to influence public ac-
ceptability. The margin of superiority for cuprcmickel is not ex-
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226 COINAGB ACT OP 106S
tremely wide but it is ccmsistent. Pd^tic acceptability of ni^el silTer
might conceivably be afTected adversely by the fact tJiat it is a radier
cheap silver substitute with extensive household uses, e^., it is the
ccHnmoQ base for silver-plated flatware.
Operation in Vending Machines
Very little work has been done on the use of nickel silver in voiding
machines. However, the electrical resistivities of nickel silver (29.0)
and cupronickel (32.0) are close, both are nonmagnetic, and would
have «milar roll properties. Xickel silver coins of the right size will
work in existing rejector apparatus set for the cupronickel 5-cent piece.
As noted previously, this opens the possibility of making the 6-ceat
piece in a, new system from nickel ^Iver and making 10-, 35-, and 60-
cent pieces from cupronickel. From the standpoint of minimizing
the vending machine adjustment problem another possibility wonid
be to leave tlhe current 5-c«it piece unchanged and to introduce nic^
silver 10-, 25-, and 50-cent pieces. Either system wonld work in
the prototype NRCXD Model X rejector alcmg with existing coinage.
Either system, or ones exclusively of cupronickel or nickel silver,
would have a 5-cent piece that could be flattoied to work as a quarter
in vending machines.
Coiuiterfeiting Potential
Nickel silver would offer slightly more jjotential for counterfeiting
than would cupronickel. Both are relatively cheap materials but
nickel silver is much more readily available from a wide range of
commercial suppliers. The same consideration suggests that the use
of nickel silver blanks in vending machines would be more likely
than cupronickel. Although the use of nickel silver blanks in the
5-cent slots of existing rejectors has not been brought to the Treas-
ury's attention, it is possible that a problem might develop if a new
system were to use nickel silver in the higher denominations.
Ease and Certainty of Prodaction
The Mint has made nickel silver coins for foreign countries and the
experience was satisfactory. The melting of the alloy materials pro-
duces zinc fumes which could be a problem where Mint facilities are
located in downtown regions. The fumes can be removed by the
installation and operation of electrostatic precipitators, or the copper
and zinc can be prealloyed in a separate melting operation. The re-
sulting increase in cost can be estimated at roughly 10 percent De-
spite this complication, nickel silver undoubtedly could be fabricated
and minted in large volume on existing Mint equipment.
Cost and Availability of Raw Materials
Manufacturing costs would be somewhat highw on this allc^ than
on cupronickel fdthough materials cost would be sli^tly lower since
Digitized byGoOglC
COINAGE ACT OF 19«5 227
some zinc is substituted for copper and nickel. Zinc is only about one-
sixth as expensive as nickel, and ordinarily about one-third to one-
half as Kcpensive as copper. The overall difference in cost between
cupronickel and nickel silver alloys would not be large enough to influ-
ence the choice between them.
Conclusion : Acceptable as pos^ble coinage alloy.
Plastic Coinage
Several exploratory letters have be«i written to the Treasury by
firms engaged in the manufacture of plastics. One firm sent a sample
plastic medallion to the Treasury, hut the overall appearance of the
medallion did not inspire confidence as to the degree of public accept-
ability plastic coinage would find. It is possible that in time some
combination of powdered metal and plastics technology could be used
to produce satisfactory coins. However, the Treasury has no reason
to believe tJiat such developments are imminent. The case for the
introduction of plastic coins was argued by the Comptroller of the
Royal Mint several years ago. At the time this aroused some inter-
est in plastic as a coinage material. This interest seems now to have
ebbed. There are no known instances of the use of plastic as a coinage
material, and it must be rejected from consideration on the basis of the
present technology. Much the same verdict must be given on glass
coins.
Conclusion : Rejected — poor quality and probable public avei^
sion to nonmetallic coins.
Stainless Steel
Pnblic AcceptaUlity
Stainless steel is lighter than most of the conventional coinage ma-
terials with a density of about 7.8 to 8.0 depending upon its ctnnposi-
tion. Coins made of stainless steel are white in color and their wearing
qualities are superior to those of any other coinage material, except
possibly pure nickel coins. Because stainless steel is very hard, coins
have to be made with less relief, ue., the design and lettering are not
raised as far from the coin background as in the case of coins made
from softer alloys. The overall appearance of stainless steel coins
suffers as a consequence. The foreign use of stainless steel coins is lim-
ited to Italy (100 and 50 lire) and Turkey. Public acceptability of
stainless steel coins in this cotmtry is conjectural.
Plain carbon steel can be clad with a relatively thin layer of anothtt*
material, usually about 16 percent of the thickness on each side. Clad-
ding materials currently being used in this way are nickel and cupro-
nickel in Argentina, brass and copper in West Germany. The edges
of these coins are unattractive and susceptible to rust. The coins do
not merit serious consideration for use in this country.
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228 COINAGE ACT OF 1966
(^ration in Vending Machines
Vending machine teet results on stainless steel have not been en-
couraging to date. Stainless steels containing 10 percent and more of
nicbe) are nonmagnetic in their unworked state. But, a major diffi-
colty is that so-calted nonmagnetic stainless steels become magnetic
when cold-worked, and the coins would then be rejected in rending
machines. Three types of stainless steel, presumably nonmagnetic,
were supplied for rejector tests. Blanks made from each of the three
types of steel were refused t^ the rejectors. These blanks had been
upset at the Mint before testing and even this small amount of fabri-
cation was apparently sufficient to induce some magnetism. The
actual stamping process might well have an even stronger effect upon
stainless steel blanks. It may be that some stainless steel, suitable for
coinage, can be found that will remain nonmagnetic.
Assuming that a stainless steel can be found that will remain ntm-
magnetic imder deformation, the nature of the required adaptation of
rejectors will then depend upon the electrical resis^vity of the stainleas
steel. The National Rejector Company has done some wotk on the
problmi of building a rejector that would accept silver coins astd stain-
less steel coins of relatively high resistivity {e.g., 76 microhms-cm.).
It should be noted that a rejector such as the one NRCO is working
on would continue to accept the cupronickel 5-cent piece. No worik has
been done, so far as is known, on the presumably more difficult problem
of designing a rejector that would accept existing coinage, a stainless
steel 5-cent piece, and cupronickel 10, 26, and 50-ceiit pieces.
Counterfeiting Potential
Actual duplication of a stainless steel coin would be a very difficult
task because of the hardness of stainless steel. Although direct coun-
terfeiting would probably not constitute a serious problem because
coins would be so difficult to mint, the use of stainless steel blanks
in vending machines would seem to pose a threat of some consequence.
Material from which blanks could be made would be readily available.
It might be possible to find a stainless steel for coinage purposes
which had dectrical resistivity imlike that of the more readily avail-
able types but this is by no means certain.
Ease and Certainty of Prodaction
Stainless steel presents serious problems for the Mint. It would
be necessary, pending the construction of necessary facilities, to pur-
chase the stainless steel from outside suppliers in the form of strip.
Even so, the methods of coin fabrication would be ^itirely different
from those used in the past, or those that are presently contemplated
for the new Mint. It is true that the Mint made some magnt^ic
stainless steel coins for Costa Rica but only with great difficulty.
Mint experience on l^t production established that entirely new fab-
Digitized byGoOgle
COINAGE ACT OF 1965 229
rication techniques would be required for coins lar^r than the U.S.
25-cent piece.
Conclusion : Rejected as possible coinage alloy.
Beasons: Some question as to public acceptability, replacement
of existing vending machine rejectors, and difficult production
problems.
Silver (500 Silver-500 Copper)
Public Acceptability
Silver coins of 500 fineness would be slightly lighter than existing
coins because the density of copper is less than that of silver. The
present SO-ceot piece weighs 12.50 grams; a silver 60^c«it piece of
500 silver and 500 copper would weigh 11.66 grams. It would be
possible to t«ll 500 fine coins from 900 fine coins simply by weighing
the coins in question.
Newly minted 500 fine silver coins could be made to resemble exist-
ing silver coins by being given an acid bath at a fintd production
stage. This bath etches away the copper from the surface of the
coin, leaving a thin film of silver. With wear, now intensified 1^ the
use of coins in vending machines which test for size, the external
film of silver is rubbed off. This exposes reddish and yellowish areas
on the coin and gives it an unattractive mottled appearance.
Largely because of these poor wearing qualities, 50O silver-500
copper is not generally considered to be an acceptable coinage alloy.
The last country using 500 aIver-500 copper is South Africa which
has recently announced its decision to replace the 500 alloy with pure
nickel coins.
Public acceptability of a 500 silver-600 copper coin is highly
questionable.
Operation in Vending Machines
A strong point with 500 silver-SOO copper coinage is the very minor
adjustment of vending machine rejectors that would be required.
The slight change in weight and electric^ resistivity from existing
silver coinage would not affect the majority of vending machines at
all. Some vending machine rejectors whose selectivity range has been
made very narrow would probably require some adjustment. For all
practical purposes, it can be said that the 500 silver-SOO copper coin-
age would woii in existing rejectors.
Connterfeiting Potential
There probably would be no serious increase in counterfeiting pot^<
tial with the 500 silver-500 copper coinage, at first. As worn 600 fine
coins began to make up the bulk of coins in circulation, some wider
latitude for counterfeit coins would b^in to emerge to the extent
that the worn 500 fine coins would be less readily distinguished than
the present coinage from dieap imitaticHis made frcHn base metals.
Digitized byGoOgle
230 COINAGE ACT OF 1965
The use of blanks in vending machinee should be onl; sli^tly mon
serious with 500 fine silver than it is at present.
Ease and Certainty of Production
It is estimated that the use of an acid tnth treatment to improve
the initial appearance of the coins would increase current Mint opec-
ating costs by about 10 percent. In additim, new equipment and
additional space would be required which the Mint doee not have at
present.
Cost and Availability of Raw Materials
The reduction of silver content from 900 to 500 fineness would
reduce the direct cost of coinage metal by more than 40 percent for
a given level of silver prices. Questions of the availability of raw
materials are complex and center upon the adequacy of Treasury sil-
ver stocks to meet future coinage demand, without noaarae to mar^
purchases. These questions are discussed 8ubsequ«itly.
Conclusion: Rejected.
Reasons: Very poor appearance when worn. A quaternary
silver, discussed next, is preferred on the basis of wear charac-
teristics. A clad silver coin, subsequently discussed, would have
the desirable vending machine properties of 500 silver-500 copper.
Silver Alloy— United Kingdom (500 SilTer400 Copper-50 NickeN
50 Zinc)
Public Acceptability
The ITnited Kingdom and a large number of other countries have
in the past used an alloy consisting of 500 silver, 400 copper, 50 nicfel,
and 50 zinc, Sweden coins an alloy of 400 silver, 500 copper, 60 nickd,
and 50 zinc; Finland, one of 350 silver, 570 copper, and 80 zinc; and
Mexico, one of 100 silver, 700 copper, 100 nickel, and 100 zinc. TitB
addition of nickel and zinc to low silver content alloys reduces the
rst« of deterioration in appearance. When newly minted the coins,
and even those of lower fineness than 500, are relatively attractive.
However, the appearance of circulated coins would stiU leave much
to be desired, despite the addition of nickel and zinc that helps to
dday the appearance of the mottled surface that is oharacteristic of
coins of low silver content. On technical and metallurgical gronnds,
the 500 quaternary alloy is not acceptable if coins are required to
wear well and retain t^eir appearance for 20 to 25 years. Conse-
quently, it is clear that the alloy merits consideration only if a very
high premium is placed upon the retention of some silver in the coin-
age. Even then, in the judgmrait of the Mint technical staff, the
quaternary alloys would be a poor way to accomplish this end. Silver
clad coins with high content silver as the outside layers would be
preferable on the groimds of appearance and wear characteristics.
Digitized byGoOgle
COINAGE ACT OF 1965 231
Operation in Vending Macliines and Counterfeiting Potential
The addition of nickel and zinc in the quatemaTy alloy r&iseg the
electrical resistivity of the hardened coin to about 6.8 microhms-cm.
This means that the coins would not work in vending machinee with
the eddy-current rejector. The resistivity range of rejectors could
probably be widened to accept the existing coinage and the quaternary
alloy but this would be a major undertaking, involving major revamp-
ing or replacement. Furthermore, if this were done, vending ma-
chines would be much more vulnerable to a variety of foreign coins
and blanks than they are at the present time. The potential for direct
counterfeiting of this alloy would not differ greatly from that for 500
silver- 500 copper.
Ease and Certainty of Production
A quaternary alloy is a much more difficult problem for the Mint
but it could be made without drastic change in existing procedures and
equipment. The most significant modification of current practice
would be the double melting process required so that zinc could be
added in alloy form. Approximately a 30-percent increase in melting
equipment would be required.
Cost and Availabilify of Raw Materials
As in the case of 500 silver-500 copper, the major uncertainty is
the price and availability of silver in the event that Treasury stocks
did not prove adequate to meet coinage and other requirements.
Conclusion : Barely acceptable as a coinage alloy.
Silver Clad Coins
Battelle has examined a wide range of multilayered coinage ma-
terials, including some with high-content silver alloys as the outside
layers. The inner core <m these coins could either be pure copper or
a low-content silver-c(q)per alloy with the overall fineness of the alloy
varying according to the exact specifications of the outside layers and
the inner core. If the present 900 fineness alloy were to be clad on a
pure copper core, the resulting material would be approximately 400
in fineness. Much the same overall fineness could be achieved by
using 800 fineness silver as the outside cladding and substituting a
low-cont«it silver-copper alloy as the inner core. For example, the
Mint has made ezperimraital strikes from 800 fineness silver clad on
a 215 finffliess silver-copper core which gives an overall finmess of 400,
The requirement of a minimum thickness of (Padding to insure rea-
scmable wear characteristics precludes any marked reduction in ovot-
all silver content and tor practicid purposes an avu^ge fineness of
400 can be taken as broadly representative of the minimum silver oon-
t«ii, acceptable from a tedioical and metalluigical standpoint, where
high finMieas silver is clad va a pure copper or a low-wmtent silver ooro.
85
Digitized byGoOgle
232 COINAGE ACT OF 1965
Any fineness much lower than 800 in the outside cladding would not
make an acceptable coin.*
Public Acceptability
Silver-clad coins would be qaite attractive in appearance if the out^
aide cladding were at least 800 fineness. In such a case, the color would
be the same as that of the present silver coinage except on the edges of
the coins. When the core is composed of silver-copper alloy the edges
of newly minted coins differ very slightly from the preswit coinage.
Wear characteristics of silver-clad coins would be satisfactory if
minimum thickness requiremaits were observed on the out^de
cladding.
Operation in Vending Machines
The high silver-copper clad on low silver-copper alloys would work
in all vending machines without adjustment. If a pure copper core
were used, most machines would need adjustment and pure copper
slugs would then be accepted.
Counterfeiting Potential
Clad coins would be more difficult to counterfeit than the existing
silver coinage.
Ease and Certainty of Production
The Mint has a sub^antial but limited capacity for the melting
and rolling of silver-copper alloy strips but would probably ha.ve to
purchase strip from outside suppliers. As a general proposition, it
appears that the cladding of silver would present some difficulties
where dependence had to be placed upon outside suppliers for a large
volume of material. In any event, all bonding (cladding) operations
would have to be performed in private plants.
Cost and Availability of Raw Materials
As with coinage of 500 fineness, the crucial question is whether
Treasury stocks of silver would be adequate to meet longrun coinage
requirements, and, if not, what effect Treasury purchases of sUver
in the market would have upon price.
Conclusion : Acceptable coinage alloy from a technical and met-
allurgical point of view. .
1 On tbe butt of their anttl/aia of tbe oTernU lUver sltnatloD, Battelle determlnMI tbat It
would probabi; be neceiaary to reduce tbe aUver ointent of tbe coinage to about IB iwrcent,
and even lo the need might arise to abandon ailrer altogether aa a coinage material Knnc-
time In tbe ISTO'i. Conaequentl;. tbeir primary recommends tlona veie for base allay
coinace, but tbey also luggeited that tf any lilTcr were to be retained In the finbuidlarj
coinage, it ahonld eltber be limited to a blgb-content balf-dollaT or epreid ver/ thinly
through the labaldlary coinage. In the Utter case, they auggcBted that ■ 400 BDeneaa
■liver Quatemarr aUoy nud a« ontalde cladding on ■ copper-alloy core "might poulUy
meet minimum atandarda of acoeptable appearance." In the Judgment of the Mint tech-
nical ataS, the quaternary Bllver alloya are undesirable on technical and metallarglcal
grannda and the exterior allTer cladding on any compodte coin ahoald not be rediwed
below SOO.
Digitized byGoOgle
COINAGB ACT OF 1965 236
Other Clad Coins: Capronickel (or Nicket-^ilTer) Clad on a
Copper Core
The multilayer principle recommended by Battelle can be applied
to base alloy coinage. Coins with outer layers of capronickel clad on
a copper core will operate in existing vending machine rejectors along
with the present silver coina^ (probably nickel-silver would also
work as outside cladding but tests have not been made) . This resolu-
tion of the vending machine problem would allow the rapid introduc-
tion of new coins without the difficulty, expense, and inconvenience of
modifying existing coin rejectors. On the other hand, the clad coins
would be more expensive to produce than the straight cupronickrf
alloy and strip will have to be purchased from outside suppliers.
Public Acceptability
These cupronickel clad coins would be only slightly lighter in
weight than the existing coinage. The color of the coins with cupro-
nickel cladding is very good. Because of the copper core, a reddened
edge is exposed in the blanking process. Milling of thecoins improves
their appearance. Wear tests conducted by Battelle and by the Mint
technical staff point to an expected average life of 20 to 30 years. The
coins are expected to retain an attractive appearance throughout their
life in circulation.
Operation in Vendii^ Machines
As recommended by Battelle, the Mint and the rejector industry have
conducted extensive testing of the operation of cupronit^el clad coins
in existing vending machines. This testing has demonstrated that
when produced according to specifications ( which are not intolerably
narrow) these coins work in unaltered vending machine rejectors.
Counterfeiting Potential
The reddened edge of these coins and the difficult production process
for the clad material from which they are made should insure against
counterfeiting on any substantial scale. Vending machines set for
silver coins will accept these clad coins and in time, the sensitivity of
rejectore could even be narrowed slightly from their present settings
if desired.
Ease and Certainty of Production
The Mint has made sizable production runs using the cupronickel
clad material and has not encountered any difficulties of consequence.
Given adequate supplies of the clad strip, hi^ levels of production on
the new coins could be reached quickly.
Cost and Availability of Raw Materials
The availability of the cupronickel clad strip from outside suppliers
has been under intensive investigation by the Mint. This investigaticm
■dbyGcK^le
234 COINAGE ACT OP ig«6
is continuing but enough is known at this time to insure that adequate
supplies of the strip will be available to support the full-scale produc-
tion effort on the new coins that will be necessary during any transi-
tion to a new coinage system. Cost eetimatee are not yet entirely
firm but it appears that the processing cost on the strip material will
be in the neighborhood of $1 per pound, perhaps less as experience is
gained with large-scale production.
Conclusion : Acceptable coinage material.
Titaniam
Titanium has been suggested to the Treasury as a coinage material
but does not appear to be suitable. A major shortcoming is t^e alloy's
light weight. No work is known to have been done on the rejector
problem, nor is there any experience with mint fabrication of the metal.
The melting point of titanium is too high to permit the use of ordi-
nary brass mill equipment.
Conclusion : Rejected,
Zirconinin-Hafniuin
Zirconium-hafnium has been su^ested to tiie Treasury as a possibte
alloy from which 50-cent pieces might be made. However, the coat
of the alloy would appear to be prohibitive, wholly aside frwn other
considerations. Zirconium strip was quoted to the Treasury at about
$8 per pound — the 1963 Minerals Yearbook quotes $10 to $14 per
pound. However, the addition of hafnium, recommended to enable
the detection of counterfeit coins, would raise the price sharply. Haf-
niimi is quoted at $138 a pound. One company thought that a zirccHii-
um 88-hafnium 12 alloy could be provided at a cost about equal to
silver with some chance that the resulting volume of productitm mig^t
lower tlie cost to 50 percent of silver. Under the circumstances, neither
zirconium nor zirconium-hafnium appear to be eligible coin alloys.
Conclusion: Rejected.
Summary
For summary of the material in Section IV, see the tables in the
Summary at the beginning of the document.
■dbyGOOgIC
COINAGE ACT OF ISeii
V. Problems With a Changeover to Reduced Content
Silver Coinage
The diacussion of technical and metallurgical conslderatitnis has
reduced the potentially acceptable coinage materials to six. These
are: cupronickel (75 copper-25 nickel), nickel silver (65 copper-18
nickel-17zinc,orsHghtlydiffereKt proportions), cupronickel or nickel
silver clad on a copper core, the IN CO alloy (95 nickel, 5 silicon with
a magnetic core), the United Kingdom silver alloy (500 silver, 400
copper, 50 nickel and 50 zinc), and silver clad alloys (overall fineness
about 400) . The present secti<m discusses the feasibility of a change-
over to silver coinage of reducai content; a section to follow will
discuss similar problems for the base alloys.
Special Problems With the Silver Alloys
The major questions not yet discussed with respect to the two re-
duced content silver alloys — tlie United Kingdom quaternary and
silver clad — are whether Treasury silver stocks would be large enough
to achieve two objectives: (a) Hold the spot market price of silver
below $1.29+ ' by means of redemptions and/or sales of silver to the
market during a period of transition, and (b) meet Treasury coinage
requirements after the period of transition and thereby minimize tiie
danger that the longrun market price of silver would again imperil
the subsidiary coinage.
The first objective of holding the market price during the transition
period is absolutely essential to protect the Existing coinage. If the
market price were to break loose, much of the existing coinage would
quickly go out of circulation and there would be a risk of serious dis-
ruption to commerce. The second objective of retaining large Treas-
■It tB occailonaUr BusKeated tlut tbe Hoe be hdd at tl.8S+, Instead of 11.29+ bIdcc
■liver dollar* are not Ilkeir to Btaj In circulation anywR]'. It la aleo BnegeBled that mme
■neb rite In price might be Induced bf msklng tbose vho want silver collect tbelr own
BllTsr certificates ; otberwlse It Is clear that the law woold have to be altered to that
tbe redemption right did not coatlnue to place an ettectlFe celling at tl.S9 + . In anj
erent, the sllgbt narTOwlDg of eiceaa market demand that the B-cent price [Dcreaae cal^t
eoncelvabl; encourage would sorelf be ontwelghed bj the Immediate stimulus tbat vould
be glTen to large private apecalstive parebaaeB of allver, apot and forward Tbe Judgment
of anjone wbo had earlier gone long on aUver at 11-29+ would be vindicated. AltboDgb
some profit taking might reault, the net effect would undoubted!; be to encourage mach
larger speculative poaltlona In anticipation of tbe next price Increase. If the Treasarj
could aaanre the market that tbe tl-3S+ line would be held Indeflnltel?. a move to fl-SS-K
might be regarded as advantageous. It ta ver; hard to aee how the market conid be anre
tbat the new celling would be held after the earlier one had been abandDned,
Digitized byGoOgle
236 COINAGE ACT OF 1960
ury stocks of silver after the transition is perhaps not quite so vital,
but it would be difficult to recommend reduced content coinage if ft
were uncertain that Treasury stocks of silver would meet coinage needs
for a good many years after the transition period.
The approach employed here will be to work through arithmetic
examples of the possible effect upon rreasury silver stocks of two
alternative ways in which the transition to reduced content silver
coinage might be attempted. These examples are not intended as
definite forecasts of what would necessarily happen.
Forecasting the future behavior of silver markets is extremely
hazardous. This, itself, cannot fail to be a major factor in determin-
ing the eventual decision on coinage alloys. However, despite the
wide margins of uncertainty, it is believed that the examples presented
here provide some insight into the feasibility of a tratisiticm to silver
coinage of reduced content. While every effort has been made to
choose assumptions that seemed inherently plausible and consistent
with the available data, inevitably the choices may be subject to ques-
tion. Therefore, the assumptions that have been made will be dis-
cussed in some detail, and the components of the projected changes
in silver stocks will be separated as clearly as possible.
The Mint Coini^e Estiinates
The basic coinage estimates in Table 1 were supplied by the Mint.
The columns for 500 fineness coinage reject an assumption that, be-
cause of the time required to obtain necessary legislation for a change
in coinage alloys, the change to 500 fineness coinage would not occur
until January 1, 1966. The estimates of total coinage requirements
are based upon an assumption that the crash coinage program will have
been concluded by the end of fiscal 1966, after which time the Arthur
D. Little trend estimates of coinage requirements will be valid. Fiscal
1964 coinage is actual, while the estimates for fiscal 1965 and 1966 are
based upon the latest budget estimates.
Other tables in this section use the Mint coinage estimates, ad-
justed to A calendar year basis, and the figures for calendar 1964 will
differ slightly from the actual amounts of silver that were used. Addi-
tional assumptions regarding redemptions, transitional and replace-
ment coinage requirements, and recovery of old coinage have been
made in the course of the present study and underlie the arithmetic of
some of its tables.
Treasury RecoTery and Replacement of the Existing Coinage
It will be useful to begin with a brief description of the way in which
the Treasury might attempt a transition to reduce content silver coin-
age. The Treasury would have to plan to recover as much as it
Digitized byGoOgle
COINAGE ACT OF 1065
237
could of the 900 fineness coinage, meanwhile producing new lower con-
tent coins at a rate sufficient to insure an adequate supply of total
coinage at all times. Throughout this process, the price of silver
would have to be held below the melting point of the 900 fineness
coinage in order to assist the recovery of old coin. It would not be
sufficient merely to prohibit the melting and export of coins since
hoarding oould also prevent the Treasury from making substantial
recoveries. Indeed, controls over the melting of coins are redundant
so long as the market price of silver can be held and they are likely to
be ineffective If the market price cannot be held. As discussed later,
it may nevertheless be desirable for the Treasury to obtain standby
authority for controls over the melting, hoarding, and export of coin
and bullion.
Table 1. — Estimated Use of Stiver Bullion for Coinage at 900 and
500 Fineness
[In millionB of fine ttoj ounces]
TfacBlyeBT
BsttnuM aUTO D»eiled br
900 fine eoliuce
MW
flne
c-ta^
144.0
27Z2
33ao
119.9
111.9
11R3
12a 2
125 3
isao
136.4
272.2
6&0
1968
61.6
1970
6&2
71.6
Attempting to call in the old coinage and have it exchanged for the
new coinage does not appear to be practical or desirable. It would
be too difficult, indeed impossible with present Mint facilities, to pro-
duce and accumulate a substitute set of coins while also meeting cur-
rent coinage requirements.
Table 2 summarizes a hypothetical situation in whidi the Treas-
ury attempts recovery of tlie existing coinage through ordinary chan-
nels in a transition to 500 fineness silver coinage — the United Kingdom
alloy with 400 copper, 50 nickel, and 50 zinc. Column (1) of Table 2
presents an iidaptntion of tlie Mint coinage projections of Table 1.
In Table 2, coinage estimates have been placed on a calendar year baas
by successive averaging of Table I's fiscal year figures, and it is as-
DigitizcdbyGoOgle
238 COINAGE ACT OF 1965
Bumed that 500 fineness coinage would not begin until January 1,
1967, because of the need to modify existing rejector mechanisms.
It will be recalled that the addition of nickel and zinc to the alloy
raises its electrical resistivity out of the resistivity range of the present
silver coins. It is possible that the vending machine adaptation could
be accomplished more rapidly than is assumed io Table 2. In such a
case, the introduction of the new <»ins might even be brou^t forward
to January 1, 1966. The essential conclusions to which Table 2 points
would not be greatly modiiied as a result.
Table 2.—Proiecte& Behavior of Treaivry Silver Stock Through Calendar Year
J97$ Where Coinage of 500 Finenetg Begin* Jan. 1, 1967, 900 Fine Coinage It
ParHallv Recovered and the Market Price of Silver I» Held at tl.23+ During
a i-Year Tran«ition Period
[MUUona of fine tio; ouncea)
PotentlBl .11101111111 of iUtw used In oolnipi
PotenlW
Tnwory
(B)
Calendar
yeiirs
Mint
or ordinary
(1)
neaacolnace
0)
required to
(3)
.Si
(S)
'ST
stock at
end of
period
CD
-208.1
"5:
-61*
-es.7
:::
-TIT
-208.1
-29(Il9
-321.0
-3m. B
-Tao
-T3.7
Iter
1M8
IBM
WTO.
-186. T
-U.B
-83,3
-83. S
-83.3
-loao
-N0O.O
+M0.0
+20aD
+ioao
ITI.«
3U.1
(-)
It is possible to conceive of even earlier introduction of the new
coins. This would cause some disruption because the new coins would
not work in aU vending machines. As long as the new coins were a
fairly small part of all coins in active circulation, the situation might
be tolerable. However, the new coins would require a slightly different
production process, and it does not appear that it would be possible to
start productitm much before early 1966 under the best of circum-
stances.
The treatment of silver dollars in Table 2 and all of the subsequent
tables in this section is the same and should be explained at this point.
The 45 million authorized for this fiscal year have not been produced,
and it is possible that they will not be. However, this will not reduce
the overall amount of silver used by the Mint^ The chief limitation on
current production of subsidiary coinage is the amount of slab anneal-
DigitizcdbyGoOgle
COINAGE ACT OF 1065
239
ing capacity in the Mint. It is understood that silver not used in
coining silver dollars would be used in subsidiary coinage, up to thfl
limit imposed by annealing capacity, during the remainder of the
crash coinage program. Therefore, the amount of silver originally
included for silver dollars is appropriately left in the tables during
the crash coinage program.
Columns (2), (3), and (6) of Table 2 all relate to the recovery and
replac^nent of the existing coinage. Estimates of the silver content of
subsidiary coinage that would be in circulation at the time of the trMi-
siti(Mi are necessarily approximate; but the Mint estimates that some-
thing like 1,600 million ounces of silver is probably outstanding in the
form of subsidiary coinage. In a recent press release, the American
Mining Congress has mentioned a figure, apparently based upon
Circtdation Statemeni estimates, of 1,400 million ounces in subsidiary
coinage, and 400 million in silver dollars, for a total of 1,800 miUion
ounces, of which they feel foreign experience suggests that some two-
thirds, or 1,200 million ounces, could eventually be recovered by the
Treasury.' It would seem unwise to count on recovering any 900-
■fineness silver dollars, and the Mint figure of 1,600 million ounces
of subsidiary coinage will be taken as representative of the size of the
pool from which recoveries might be made.
How much of the old coinage really could be recovered by the Treas-
ury is very uncertain. It has been suggested that, on the basis of
foreign experience, eventually as much as two-thirds of the old coinage
could be recovered. However, the attempt to recover our existing
coinage would come at a time when severe coin shortages have just
been overcome and would have to proceed with the market price of
silver at its monetary ceiling. Hence, the foreign experience of sub-
stantial recoveries may well be irrelevant.
A question also exists as to the probable time profile of the recovery
of the old coinage since it obviously would not "pay" to hold the price
of silver indefinitely while only a trickle of recoveries was being made.
Current figures on the flow of coin to and from the Keserve banks are
not of much aid in this connection because they are distorted by the
coin shortage and consequent changes in the circuit flow of coin. This
changing pattern is reflected in Chart I which shows coin payments
and inventories of the Federal Reserve banks and their receipts of
coin from the Mint and the member banks since 1961. The success of
' On the bBBlB ot B BtatlaticBl saniplliis of Uie ase dtatribntloD of coins In drcnlatloii,
.\Tthnr D. Little Inc.. eetlnlBted the value of bIItcf aubaldlarr coinage In clrcalatlon an
January 1, 1S63, at $1,117 million, a allver content of about SOO mlUton fine oddccs. (See
Btaringi on B. S^^ brfare the Subcommittee an Financial Inatltutlona of the Senate Com-
mittee on BaDking and Currency, March 2fl. 1903, pp. 117-120.) On January 1. IMS, tb«
Cinmlation Statement showed a valne of (1,739 mlUlan, a BllTer content of abonl 1,400
million ounces. The Hint estimates used in this section Implr a loaa rate falllni between
that Id the A. D. Little study and that osed In the <7lrc«latlon Statement.
dbyGoogle
240 COINAQE ACT OF 1965
the Mint crash coinage program in rebuilding coin inventories during
early 1965 is clearly apparent. However, in the present context, it is
the reflow of silver subsidiary coinage that is pertin^it. This is shown
separately in Chart II. The statistics for fiscal 1961 and 1962 do indi-
cate relatively large annual gross flows of subsidiary silver coin hack
to the Federal Reserve banks in normal periods. However, these dat*
are seriously defective for the purpose at hand, not only because of the
constricted flows now occurring, but also because there is no way of
knowing to what extent the larger flows in earlier years simply re-
flected a continual recycling between the Reserve banks, the member
banks, and some coin users of a relatively small fraction of the total
outstanding coinage.
Column (6) of Table 2 shows total Treasury recoveries of 1,000
million ounces over a 4-year period, with recoveries declining stead-
ily. Total recoveries are placed at five-eighths, rather than two-thirds,
of the amount assumed to be in circulation because only 4 years are
allowed for the recovery period, instead of the longer period to which
the estimate of two-thirds recovery must be taken to refer. Even bo,
the estimate of recoveries is very generous, and to recover this amount
of coin in 4 years it is doubtful whether the Treasury could depend
solely upon routine recovery through the Federal Reserve banks even
if there were no coin shortage. The cooperation of commercial banks
and coin-collecting agencies probably would have to be sought. It
should be emphasized very strongly that unless the coin Mortage hiMl
been entirely broken by the time recovery of the old coinage was atr
tempted, nothing like this amount of coinage could possibly be re-
covered. The estimated scale of recovery is included in Table 2 and
later tables not because it is inherently plausible, but simply to work
out the implications of attempting a transition to reduc^ content
silver coinage under favorable circumstances.
■dbyGOOgIC
COINAGE ACT OF 19«S
Digitized byGoOgle
COINAGE ACT OF 1965
Receipts of Silver Subsidiary Coins by the Federal Reserve
Banks from Member Banks and Others, Exclusive of Eecelpts
of Coin from the Hint, Itonthly, 1961-1963
120
110
100
\
/2\
90
\/^
^^>^^
:VX
80
v%
^^^v<;nx^.
\ ^^
70
\
'\h\
60
^^
\
50
\
\
40
^
\
1963
30
^^
\^
20
1965
^^— .^
^^•-^ ^
10
1964
Du,iiz=db,Google
COINAGE ACT OF IftOS 243
ThB gross recovery of the existing coinage by the Treasury is not a
net addition to Treasury silver stocks because of ths need to replace
the higher content coin withdrawn from circulation. Additi«ially,
the Treasury probably should plan to replace the higher amtent coin-
age which is not recovered, since it would have to be assumed that
much of it had been hoarded and would no ItMiger be available tor
transaction purposes. The estimates of coin in circulation possibly
include a certain amount of coin that has been lost Althoo^ the
Mint estimates do attempt to correct for this, the correction may not be
entirely adequate. Hence, complete replacemmt of the coinage re>-
corded as being in circulaticm would not necessaiily be essential. The
table is omstructed oa the assumption that complete replacement is
Bttemtd«d. The effect of rdazing this assumption will be noted
subsequently.
Column (2) shows the amounts of 500 fineness coinage required to
match recoveries of 900 fineness coinage, and column (S) shows the
estimated amounts required to offset ntHirecoveries. On the assump-
tion of totid recoveries of 1,000 millicHi ounces from a stock of 1,600
million ounces, there are 600 million ounces of the old coinage to be
replaced at five-ninths of the original fineness. The amount is alio*
cated in column (3) evenly among the 4 years. The sum of columns
(1), (2), and (3) gives the total coinage requirements whidi the
Treasury should plan to meet
In addition, some silver would have to be used to hold the market
price of silver during the transition pmod. Column (6) shows the
amounts of redempticMis or outright sales to the market that might be
required. It should be noted in this connection that to revoke the
redemption right would not free the Treasury from the need to sdl
^ver to the market Protection of the existing coinage requires that
the market price of silver be stabilized; this requires sales of silver to
the market equal to excess demand at the stabilized price ; whether or
not certificates are retired is a separate, although impc»tant, questicm.
The amounts shown in column (5) for market stabilizaticn are nec-
essarily fairly approximate, although they do not seem unreasonably
high in the light of recent experience. Bullion exchanges against sil-
ver certificates in 1964 were close to 150 millicm ounces. It is assumed
that excess demand would decline to 100 million ounces in 1966, reach a
"normal" level of about 75 million ounces by 1966, and remain there
through 1968. As the tran^tion period neared completion, the matkrt
would come to expect an increase in the price of silver and scHne specu-
lative demwid would be added to ordinary requirements. Therefore,
sales to the market are increased to 100 million ounces in 1969 and to
150 million ounces in 1970.
■dbyGoogle
244 COINAGE ACT OF 1960
Such a pattern of Treasury sales does not make allowance for any
strong feedback from the sharply falling silver stocks in colunin (7)
to the redemptions in column (5). Yet, as the stock of silver feiU,
there could be an acceleration of redemption demands. Very heavy
speculative pressure could develop in the case of any transition to silvMT
coinage of reduced content. The rate of redemptions in late 1964, dur-
ing a mild speculative Surry, should remain as a sobering reminder of
the potential scale that speculation in silver can quickly take.
The decline in Treasury silver stocks on the assumptions embodied
in table 2 would be rapid. Despite the recovery of a large amount of
900 fineness coinage, stocks would be entirely exhausted before 1870.
The overall result is not very sensitive to moderate chongee in the
assumptions that underlie it, although the exact point at which Treas-
ury stocks would run out is shifted in time by most changes in
assumptions.
On the as8umpti<Mis of Table 2, about 800 million ounces of silvw
are used in replacing the coinage that is not recovered. It could be
argued that this need not be done because some unrecovered coin will
have been recorded in circulation when it actually was lost. This
may well be true and implies that not all of the unrecovered coin
need be replaced. However, to argue that none of it need be replaced
is to assume that the coinage stock just prior to the transition would
be in excess of public requirements so that some increase in hoard*
ing could be tolerated. Certainly there is no present evidence that
the stock of silver coinage is excessive relative to the demand for it.
It is very difficult to know how much, if at all, the more than 300
million ounces of silver scheduled to be used in replacing unrecovered
coinage could safely be reduced. Therefore, the table carries the
full amount.
It could also be argued that the time pattern of recovery of old
coin might be more rapid than has been assumed here. This would
permit a shorter transition period and possibly reduce the overall
amounts of silver used in stabilizing the market price. The probl«n
here is in knowing just what degree of shortening of the time pat-
tern of i-ecoveiy would be a practical possibility. This is explored
subsequNitly with the aid of an example based upon slightly differ-
ent assumptions.
In summary, if it were decided to try to replace the existing coin-
age, the likelihood of successfully negotiating a transition to sub-
sidiary silver coinage of 500 fineness does not appear to be very great
at all. On the assumptions used here, the Treasury would be back
in the market before the transition was even complete, but the Treas-
ury would now be buying silver to meet its coinage requirements,
■dbyGOOgIC
COINAGE ACT OF 1965 245
rather than selling to protect the existing coinage. The total ex-
haustion of Treasury silver stocks before the transition was even
completed would not necessarily occur on all assumptions. With a
shorter period of transition, instituted somewhat sooner, the sav-
ings in the sales or redemptions required to peg the market price
of silver could be sufficient to leave the Treasury with some silver
after the transition. On any reasonable set of assumptions, how-
ever, it does not appear that the Treasury would be likely to have
very much silver left.
The general conclusion remains, therefore, that it would appear
to be impractical and extremely hazardous to attempt to replace
the existing subsidiary coinage with 500 fineness silver.
Recovery and Replacement With 400 Fineness Coinage
Table 2-A presents the comparable situation where a transition
is attempted to subsidiary silver coinage of 400 fineness; for example,
800 fineness silver clad on a low-content silver-copper core. The pic-
ture is somewhat improved relative to 500 fineness coinage, although
the decline in Treasury silver stocks is still very rapid. The decline
in Treasury silver is not quite so precipitous for two reasons. First,
new coinage at the 400 fineness rather tlian 500 takes only four-fifths
as much silver. Second, coins made from silver clad on a copper
core would work in existing vending machines. Hence, it is as-
sumed that the production of new coins, and recovery of old coins,
could begin on January 1, 1966. This shortens the transition period
and reduces the amount of silver that must be used to stabilize the
market price of silver at the melting point of the old coinage. The
transition could not begin much sooner than January 1, 1966, be-
cause of the probable leadtime required for the production of re-
quired amounts of the clad strip. Other assumptions are the same
as those discussed for the transition to 500 fineness and do not re-
quire additional comment now, other than to reiterate the earlier
warning that recovery of any substantial part of the existing coinage
in presrait circumstances seems extremely doubtful.
■dbyGOOgIC
246
COINAGE ACT OF 1966
Tarli a-A. — Prnjcrlfd Behavior of Trcamry Silver Slock Through Calemfar
Year 1978 Where Coinage of iOO Fineness Hegim Jan, 1, 1986, 900 Fine Cnin-
age Ik Partiallv Recovered and the Market Price of Silver la Held at tt.t9+
Durtng a i-Year Troniitiott PerioA
[UUIloos ot tin* tray oanca]
Potenttal MDOUDtool »U«r and In ooliuc*
Potenttol
unoanbiol
CilandM
raqnlie-
(1)
required to
ntplw*
SJSSt
nWMlTiW
(»
SIM
lUncartS-
tbB market
•odor
period
(7)
-m,
-nan
-1(0.8
-I12.§
-sat.
-s».»
-M.»
-ea4
-mo
-■2ia.i
-207. e
-1M.0
-Ml 4
-wao
'
i,m.o
i;;;;;;;
IW-
-133.3
-e<i7
-73.
-l»0
+4oao
4-3O0LO
+3nao
+ioao
«1.T
m.1
i); column (3) eqoala U ol total nonneoTerlu ot no, diTidad
However, accepting the hypothesis of substantial recoveries upon
whidi Table 2-A is based, ihen is some room for difference of opinicm
whether or not it would be possible to negotiate the transition and re-
place the existing coinage with 400 fineness coinage. The arithmetic
of Table 2-A implies that the transition might be made. Certainly, no
very large margin of safety would exist, particularly since the steady
decline in Treasury silver quite possibly woul(^ give rise to the need
for even larger sales to the market than are allowed for in column
(5) of Table 2-A. In any event, the amounts of silver available to the
Treasury for use in coinage after the transition would be small, par-
ticularly if any allowance for strategic needs were included.' On the
basis of the projections of Table 2-A, Treasury silver would be gone
by 1976 or 1977. After that time, the Treasury would have to bny
silver in the market. This would greatly increase the chance that the
market price of silver would again eventually be driven to the melting'
point of subsidiary coinage. It is true that the new melting point in
excess of $3 would provide more leeway for price-induced adjustments
in market supply and demand.
A Different Approach
Tables 2 and 2-A are necessarily based upon fairly rigid assump-
tions and these affect the pattern of decline in Treasury stocks. It
would be possible to vary some of these assumptions and note the effect
Digitized byGoOgle
COINAGE ACT OF 1985 247
that this would have aa the result, lliere may also be some value in a
slightly different approach. Instead of assuming a certain pattern of
recoveries of the old coinage and observing the net effect upon the
Treasury silver stock, the example can be turned around in order to
show what pattern of recoveries would actually be required to hold the
silver stock at any given amount. This is not oalj convenient in that
it allows one to see more clearly what rate of recovery of the old coin-
age would be required for a successful tran^titm ; it also involves a
minimum of assumptions, since recoveries of cmnage can be treated as
a residual.
It will be assumed that replacement of the entire subsidiary coinage
is attempted within a 2-year period to minimize the drain on Treas-
ury stocks from holding down the mai^et price of silver, and to reduce
the likelihood of coin shortages in the transition period. The rates of
coin production required for this rapid replacMuent would not be pos-
sible with existing Mint fadlities even if silver strip were purchased.
This limitation is ignored in the examples that follow although, in
practice, it would be a matter of overriding significance.
The rate at which old coins could be recovered is extremely un-
certain and in Tables 3 and 3-A no att^npt is made to allocate the re-
coveries among particular years. This means that the extreme right-
hand column of these tables no longer purports to give the actual
Treasury silver stock but simply registers what the stock would be
without allowance for recoveries of old coin.
Table 3 shows the situation for a 2-year replacement of the exist-
ing subsidiary coinage with coinage of 500 fineness, beginning Janu-
ary 1, 1966. Table 3 suggests that fully fiOO million ounces of silver
would have to be recovered by the end of 1967 to prevent Treasury
stocks team falling to zero. If it were snnehow possible in the space
of the 2-year transition period to recover the entire 1,000 miUicHi
ounces used in the earlier examples. Treasury sto<^ would still be
reduced to leas than 600 million ounces at the end of the transition.
The parallel situation with respect to 400 fineness coinage is pre-
sented in the accompanying Table 3-A. This example is ba^ upoi
, the same assumptions as those of Table 3 except for the lower fineness
of the new coins. In this case, it would be necessary to recover about
260 million ounces by the end of 1967 to prevent Treasury stocks from
falling to zero. TTie recovery of 1,000 million ounces of silver during
the transition period would leave the Treasury with a stock of about
750 million ounces at the end of the transition. However, it is not at
all clear how recoveries on this scale could actually be accomplished
within a 2-year period.
■dbyGOOgIC
248 com AGE ACT OF 1965
Tablk 3. — Example of the Replacement of the ExtsHnc Coinage With Cotnage to
500 FineneM During a i-Year Period; No Attowance Made for Recovery of the
Old Coinage
llnmllUoi
isofanetioyoimotii]
Potential unounli of lUvcr
lued In coliugB
silver und
oertlflcatea
market
JSsa
C*l«ndiry«n
Mint
ptojectlooof
ordliury
(1)
ooln
Total
£3)
ass,
-X0.9
-US.0
-ti.t
-«.T
-70. B
-TS.7
-aaB
-MB. 4
-M8.B
-SI. 4
-100.0
-1010
-«*.4
-444.4
I!^
-71. T
M Of mbildlarT oiln ai
Tablb 3-A. — Example of the Replacement of the Exitting Coinage With Coinage
of too Finenei* During a£-Year Period, No Allowance Made for Reooverg of
the Old Coinage
[In mllUons of floe tro7 ouneea]
uatd In coinage
PotantW
Traaanr;
Cftlandar years
requlre-
(1)
a)
Total
oolnace
niquliFd
(3)
sUnr
CMtlflcates
orlnmaklnc
Dutrlibt
(4)
St
alli^^uua
?tSSd°^
(«
-IBaB
-112.11
-SIB
-a».i
-aiae
-4fi8.1
-408.4
-isao
-lOOiO
-loao
-KB.t
M»
-m4
-B.9
-IB.9
-M.1
-«.!
The example does show that a successful transition to reduced con-
tent silver coinage, if possible at all, would require a very short transi-
tion coupled with a liigh rate of recovery of the old «>in. In interpret-
ing these examples, it should be kept in mind that the prodacti<ai of
Digitized byGoOgle
COINAGE ACT OF 1985 249
the new coins has been set arlHtrarily at required rates, without ref-
erence to the fact that such production would exceed Mint capacity.
Furthermore, no' attention has been paid to the very real possibility of
an accelerating speculative demand for silver as Treasury stocks de-
clined. It is one thing to construct an example in whidi Treasury sil-
ver stocks fall and are then reconstituted by recoveries of old coin, and
quite another thing to estimate just how destructive of confidence a
sizable fall in Treasury silver could be during an admittedly haxard-
ous transition to silver coinage of lower ctHiteut.
CondnricHis
1. llie examples that have been presented do not exhaust all the pos-
sible ways in which a transition to reduced content silver coinage
might be attempted. It is believed that they do cover the more prom-
ising alternatives open to the Treasury. The general conclusion must
be unmistakable. The transition to silver coinage of reduced content
would be an extremely risky undertaking, and Treasury silver stocks
would probably be depleted within a relatively ^ort period of time.
If there is a partial and limited exception to this overall conclusion,
it arises with 400 fineness where a high proportion of the existing
coinage is recovered at a rapid rate.
2. £ven there the risks would have to be judged intolerably great
unlen there were clear evidence, at the time a decision was reached,
that the coin shortage had raded and subsidiary silver coinage was
temporarily redundant.* No one could be sure in any case that the
price of silver would not be drivot again to the melting point of sub-
sidiary coinage; this might not occur within the immediate future.
In general, analysis of the special problem of the transitiim to reduced
content silver coinage suggests that attrition can appropriately be
concentrated from this point in the study upon the base alloy
alternatives.
3. However, thrare may be special reasons for continuing to produce
a single silver coin whidli would circulate alongside the new b^alloy
coins. This issue is discussed briefly in an appendix to this section.
Appendix : Notes on the Retention of a Silver 50-Cent Piece
There may be advantages in retaining a single clrqulating silvei' coin.
It seems reasonably certain that a clad silver 50-cent piece of 400 fine-
ness could be continued in our coinage system for a good number of
years, perhaps indefinitely. Furthermore, if for some reason it did
become impossible to continue silver in this limited role, a shift to a
> Tbli U elMrl; not tbc e«w At th« pruant Ums.
7S
■dbyGOOgIC
250 COINAGE ACT OF 1965
base-alloy 50-cent piece could be effected without seriouB difficulty or
disruptive effect
The amounts of silver which might be used in a clad silver 50-ouit
piece can be estimated approximately. Between 19fi7 and 1961, pro-
duction of 50-cent pieces ranged between 25 and 30 million pieces an-
nually. Since then production has increased sharply, rising to 93
million pieces in 1963 and to 206 million pieces in 1964, wh«i hoarding
of Kennedy SO-cent pieces was severe. The more recent levels are,
of course, abnormally high. A more reasonable figure might be an
annual production of 100 million pieces. This would still be about
twice the number of pieces projected by Arthur D. Little for 1968, and
it might even be preferable to start with a lower amount initially.
The important consideration, in the present context, is that the pro-
duction of 100 million 50-cent pieces from the 400 fineness silver aJloy
would use only some 15 million ounces of silver, about 5 percent of the
current rate. This amount would clearly fall within permissible
limits of silver usage, particularly since with a transition to base alloy
coinage this amount of silver might very possibly be recovered by the
Treasury from the existing coinage.
The advantage in retaining a silver 50-cent piece is the extensdon of
a continuous tradition of circulating silver coinage. Of course, senti-
ment and tradition must not be allowed to obstruct the transition to a
secure coinage system, adequate to the needs of the present. However,
by eliminating silver from the dime and quarter, a major drain «»
Treasury silver stocks would have been removed, and the retentim of
a silver 50-cent piece should be possible.
The retention of one or two silver coins is common practice inter-
nationally. Some examples are Japan, France, Italy, the Federal
Republic of Germany, the Netherlands, Belgium, and Greece. In
c<Hitinuing with the silver dollar at its existing fineness and a clad
silver 50-cent piece of 400 fineness, our own coinage system would come
more nearly into corresponding with present practice abroad. As it
stands, our own consumption of silver in coinage dwarfs that of the
rest of the world and threatens to dislocate silver markets and letid to
severe shortages for industrial use.
In suggesting the possible retention of a silver 50-cent piece, it must
be stressed that the uncertainties of the future silver situati<Hi preclude
any definite commitment as to the amounts of 50-cent pieces that would
be produced. Also, during early stages of any transition to a new
coinage system, the Mint should be concentrating heavily upon the
production of the new base-alloy coins. Production of the 400 fine
50-cent pieces should only be phased in gradually as capacity became
available and silver supplies were clearly adequate for the purpose.
Finally, at the risk of some repetition, it should be emphasized that
■dbyGOOgIC
COINAGE ACT OF 1965 251
the use of an; silver whatsoever in the 10- and 25-cent pieces (which
are crucial to the needs of commerce in a way that the 50-cent piece is
not) is ruled out for the reasons developed earlier.
The feasibility of retaining a 400 fineness silver half dollar should
be examined exhaustively by the Treasury before making its legislative
recommendationB. These notes are only intended to raise the pos-
sibility of keeping a silver 50-cent piece, not to provide the full
justification that such a course of action would require.
7S
■dbyGOOgIC
COINAGE ACT OF 1985
VI. Further Consideration of the Base Metal Alloys'
The previous seaion has concluded that the transition to r reduced
content silver alloy used throughout the subsidiary coinage would be
extremely risky and that Treasury stocks of silver would probably be
depleted during or soon after the transition period. This negative
conclusion applies without reservation in the case of the 500 alloy, and
it does not appear that the outlook is much more promising in the case
of the 400 alloy. None of the silver alloys of lower fineness Ihan 400
meet minimum standards of acceptability. As noted previously, in
the judgment of the Mint technical staff, the exterior silver cladding
on any composite coin should not be reduced below 800, and this pre-
cludes reducing the overall fineness much below 400. Therefore, the
silver alloys are eliminated as the basic subsidiary coinage material.
The possibility remains of using very limited amounts of silver in a
clad 50-cent piece, but the bulk of future subsidiary coinage produc-
tion must be nonsilver. The present section will consider the advan-
tages and disadvantages of the base alloys that remain and discuss the
ways in which the transition from the present silver coinage to a new
system largely of base alloy coinage could best be attempted.
Relative Merits of the Remaining Alloys
There are four remaining alloys : Cupronickel, nickel silver, cupro-
nickel or nickel silver clad on a copper core, and the Inco coin. No
final choice will be made from among them at this stage, but their
respective advantages and disadvantages will be summarized and a
tentative judgment established. At an early stage of this study,
criteria were developed against which it was suggested that a future
coin program might be judged. It will be helpful now to compare the
extent to which the remaining alloys do successfully meet the differwit
criteria.
■Tbli ebapter w>b written beloie tbe Mint bad completMl Its lDteD«l>« iDTMtltmtlon
or tbe clad colnase matertalH with respect to production feastblllt; aod an amared unpplr
of the bonded atrip. Conaeiiuently, It doeH not full; reflect Information availably to the
Hint and Treamry at the time the erenlual coinage dedalon wan made, nil* fact ahonld
be borne Id mind In reading the present chapter and Id Interpreting the Itodr'a Ba*I
conclnBlona and r
db,Google
COINAGE ACT OF 1965 253
Median) of Ezchansre Function and Permanence of the Solution
Any of these base alloys would ajjpear to meet the essential require-
ment of no interruption to the essential medium of exchange function,
althougli specific changeover problems with the alloys remain to be
discussed. Any of the alloys would also appear to meet the require-
ment that there be a minimal chance of any serious disruption to the
new coinage system within the next 20 to 2fi years.
Assured Access to Raw Materials
On tlie question of assured access to raw materials, the Inco coin
does present potential problems. As noted earlier, nickel does not
seem likely to present a really critical overall supply situation. But
the fact remains that U.S. production of ferronickel is unsuitable for
coinage, and U.S. coinage requirements would have to be met from
the existing stockpile of nickel and/or Canadian production. In addi-
tion to the overall nickel supply picture, the special nature of the pro-
duction process with the Inco coin means that for a considerable period
of time the Mint would be largely dependent upon a single commercial
source of supply for the alloy itself. In order to adiieve a rapid
transition to high level of production, it would apparently also be
necessary to have annealing and blanking operations carried on by
Inco at its Huntington, West Virginia, plant.
Provisi<Hi could possibly be made subsequently to carry on all or
some of these operations in the new Philadelphia Mint or perhaps to
look to a later transition to a pure nickel coin and plan the new Phil-
adelphia Mint facilities accordingly. All of this adds uncertainties
and complications at a time wh^i planning for future Mint operations
is difficult enough. These considerations and those of raw material
supply should not entirely rule out the Inco coin, but they do suggest
that it must offer some clear advantages over the other alloys to com-
pensate for its less than ideal position from the point of view of
supply.
Public Acceptability
Public acceptability of a new coinage system was viewed as rest-
ing upon a number of factors among which were demonstrated neces-
sity of the need for a change to the new system, physical character-
istics of the new coins, minimum of inconvenience to the public, and
absence of extreme hardship to a particular group or industry. The
first of these factors, the need for the change, applies equally with all
of the alloys. The physical characteristics of different coinage mate-
rials were discussed in some detail in Section IV when these four base
alloys were selected from a larger number of potential alloys.
dbyGoogle
254 COmAGB ACT OF IBOS
Physical Characteristics of the Coins
Aside from questions of operation in vending machines, it can be
argued that on the basiB of their physical characteristics the coins
should be ranked : Inco, cupronickel or nickel silver, and the clad coins.
Such a ranking would be based upon the belief that nickel is a slightly
more desirable coinage metal than cupronickel or nickel mlver and
that clad coins are generally not quite so desirable as ctHiTentional
alloys. However, extensive Mint testing of the clad materials has
revealed that their wear properties and other physical characteristics
are in no way inferior to homogeneous alloys made frxan the outade
cladding mnterinl. The reddened edge of the clad coins is a matter
of appearance on which opinions might possibly differ. So long as
the coins are durable, attractive, and perform the medium of exchange
function, the reddened edge would not appear to be a matter of very
great importance.
Operation in Vending Machines
Public acceptability will also depwid upon the new coins woiiing
in vending machines. The strong point claimed for the Inco coin
is its ability to work in existing vending machine rejectors. In srane
machines, the application of a small piece of tape has improved pw-
formance. As noted previously, the claims made for the Inco coin
have never be«i dem<Histnited convincingly, despite repeated tests.
There is reason to believe that all of the problems have not yrt been
overcome, and may never be. The case for the Inco coin does rest
primarily upon its consistently successful operation in vending ma-
chines under actual operating conditions. Consequently, the failure
of the Inco coin to demtmstrate its compatibility with the existing
silver coinage in vending machines is very nearly a decisive objectiim
to its use, Inco claims that an entirely new type of rejector mecha-
nism, based upon electronic principles, might be designed aroimd their
coin. No such equipment exists, and even if it did, it would not meet
the immediate problem.
The cupronickel clad coins have, on the other hand, conclusively
demonstrated their ability to work alongside the existing silver coins
in the 10-, 25-, and 50-cent channels of existing vending machines.
Similarly, the silver-copper alloy clad on a low-content silver core,
which has be«i suggested for use in the 50-cent piece, would work in
vending machines with no alterations required. Nickel silver clad
on a copper core has not been tested in vending madiines, but on the
basis of its physical characteristics it would work. A possibility, in
the case of the base-alloy-clad materials, would be to use one or the
other of them as a transitional coin wliile vending machine rejectors
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COINAGE ACT OF 1966 255
were being modified or replaced to accept ordinary cupronickel or
nickel silver coins.
The relative importance of compatibility of the new coinage and
the present coinage in vending machines will be discussed further
in the context of changeover problems. To this point, major em-
phasis has been placed upon the inconvenience to the public if new
coins will not work in vending machines and the possibly disruptive
effects upon the vending machine and coin rejector industries. In
addition, large companies whose products are nationally distributed
through vending machines would understandably be concerned in
such a case. These are very important considerations that should
be weighed carefully before reaching any final decision — particularly
the inconvenience to the public and possible disruption of commerce.
It should also be pointed out that under conceivable circumstances
the effort to insure that new coins would work immediately in every
vending machine could come into conflict with the more important
objective of insuring an adequate supply of coins at all times. This
could be the case if the compatible coinage material were not available
quickly in needed volume. Since this is a matter which the Mint is
investigating intensively, it need not be considered further here.
Absence of Hardship
The absence of serious hardship to any single group or industry is
a reasonable objective, whichever one of the base alloys is selected
for the subsidiary coinage material. As noted above, this suggests
the desirability, if not the absolute necessity, of finding a coin which
will work in existing vending machines, or possibly offering some
assistance to the vending machine industry if such a coin is not used.
Tlie needs of the silver users will be met if silver is removed from the
coinage — except for the relatively small overall requirements if silver
olad is used in the 50-cent piece — and the price of silver is held at
the present level during a fairly lengthy transition period. Silver
producers might reasonably be protected by a proposal that the Treas-
ury would stand ready to buy newly mined domestic silver^ — say at
$1,25+ — for a period of time. In the absence of such a purehase
program, producers might fear the market -depressing impact of the
liquidation of speculative stocks of silver, accumulated in the mis-
takeiied belief that the price of silver was sure to rise above $1.29 + .
Ease and Certainty of Production
Ease and certainty of high levels of coin production are extremely
important; they could become a vital consideration in the case of a
quick changeover. It is clear that cupronickel has many advantages
79
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256 COINAGE ACT OF 1906
here because of long Mint experience with the material and depend-
able commercial sources of cupronickel strip. Nickel silver is also a
relatively easy material for the Mint to work with ; f(s noted earlier
the addition of zinc does complicate melting procedures to some ex-
t«nt But, nickel silvw strip should be readily available from com-
mercial suppliers.
Both the Inco coin and the clad coins offer pot«itial difficulties, al-
though in the case of clad coins the difficulties quite possibly can be
resolved. The Inco coin will be hard on dies and may require heavier
presses. This assumes that annealed blanks would be supplied by
Inco, but certainty of supply cnnnot be absolutely assured in such an
event. Unless the Mint could build up very large inventories of the
blanks, which would hardly be possible at first, there would be the
threat thnt a strike at Inco, a failure in quality control, or some other
temporary interruption to the steady flow of acceptable blanks could
disrupt Mint production schedules. With the clad coins, there is
little question of the Mint's ability to work the material. But, assur-
ance of an adequate supply of the clad strip is uncertain on the basis
of what was known at the time this report was written. This imcer-
tainty will be resolved by intensive Mint investigations currently
underway.
Minimization of Cost of Coinage
The minimization of the cost of coinage is a sensible objective <mly
at an acceptable level of coinage quality. Cupronickel would probably,
offer the most seigniorage. Nickel silver should run a close second
with some increase in cost because of the need for special procedures
where zinc is alloyed with copper and nickel. The exact cost per
pound of clad strip has not yet been determined. Approximate in-
formation is available, and suggests that the cost of clad cupronickel
strip would initially be in the range of $1 to $1.50 per poimd.
Cupronickel alloy costs about 45 cents a pound and only a further
5 cents, or so, need be added in the case of the homogmeous alloy for
melting and rolling operations performed in the Mint. Where the
strip is purchased from outside suppliers, the comparable cost would be
about 65 cents per pound. The cost of cupronickel clad on a copper
core would fall in the range of $1 to $1.50 per pound, assuming the
same 45-cent cost of alloy. The Inco strip would probably cost about
$1.50 per pound. In view of the relatively large amount of seigniorage
with any of these materials and the general importance of the coinage,
it could be argued that alloy cost should not be given very much weight
in the final decision. It probably should receive some consideratitai.
One type of cost calculation which may be relevant is the extra
cost of clad strip, or the Inco coin, over straight cupronickel or nickel
■dbyGOOgIC
COINAGE ACT OF 1966 257
silver. Since the clad coins are chiefly attractive because they will
work in existing vending machines, their extra cost, if they are used
permanently, should be contrasted with the once-and-for-all cost of
altering vending machine rejectora Where clad coins were used only
during a transition period, the extra cost could be viewed as necessary
to achieve speedy introduction of the new coins. But, if clad coins
are used permanently, cost more than conventional alloys, and are
superior in no respect other than use in vending machines, a question
arises whether eventual modification of rejectors to accept conven-
tional alloys might not prove desirable.
With the clad coins, the increment paid (in the first instance by the
Mint and ultimately by the public) in lieu of altering vending machines
is probably on the order of 50 cents to $1 per pound of coinage material,
and about $1 in the case of the Inco coin. The extra cost in the case of
cup ronickel -clad coins might be $10 to $15 million annually at high
rates of coin production, and reduced proportionately at lower rates
of production. This extra continuing cost contrasts with a one-time
vending machine conversion cost that might range from $50 to $100
million if a straight cupronickel or nickel silver coin were to be used.
The use of either of these coinage materials would also, in the opinion
of the vending machine industry, involve intolerable continuing costs
because the selectivity of their rejectors would be so greatly impaired
that they would accept a wide variety of slugs and foreign coins. In
addition, there would be losses because of "downtime" while rejectors
were being modified. These losses are difficult to quantify, but could
be considerable.
Cost comparisons of the sort described here while of some relevance
could not be a decisive factor, even if plausible magnitudes could be
assigned to them. They cannot measure the inconvenience to the
public and the attendant disruption to commerce that might follow a
decision to introduce large amounts of coin into circulation which
, would not be compatible with the present coinage in vending machines.
Balance of Paj^ments Cost
Alternative base alloy programs would not have an appreciably dif-
ferent eflfect upon the balance of payments, except for the Inco coin.
There, unless nickel were used from the stockpile, imports of nickel
from Canada would increase, possibly by $10 to $20 million annually.
Other possible effects upon the U.S. international position are less
t angible and very difficult to estimate. Advocates of silver in the coin-
age will stress the importance of its retention and cite the return to
some silver in coinage by Western P^uropean countries. The retention
of the present silver dollar and the use of the 400 fineness clad alloy
in the 50-cent piece would seem to meet the requirements of prestige.
81
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258 COINAGE ACT OF 1005
Somtnary: The Relative Merits of the Base Alloys
The choice between cupronickel and nickel silver on the one hand
and between the Inco coin and clad coins on the other is best considered
separately. Cupronickel and nickel silver are "permanent" coinage
alloys; they will not work as subsidiary coinage in existing vending
machines. The Inco and clad coins can be regarded as "transitional''
coins which will wort in vending machines while rejectors are being
altered for a permanent coinage of pure nickel, cupronickel, or nickel
silver; or equally well, they may be regarded as permanent coins if it
is determined that modification of vending machine rejectors is not
desirable. It will be assumed, simply for the purpose of discussion,
that eventual modification of rejector mechanisms may be
contemplated.
Assuming that vending machine rejectors were to be modified even-
tually, the choice of permanent coinage materials lies primarily be-
tween cupronickel and nickel silver. The transititm to pure nickel
coinage appears to be impractically difficult since, as indicated in
Section IV, it would mean the replacement of practically every coin
testing device currently in use. As between cupronickel and nickel
silver, the differences are not great, although in most respects cupro-
nickel is a slightly superior coinage material. Some people feel that
nickel-silver makes a slightly better looking coin, i.e., more like silver,
when newly minted. But, this is probably more than offset by its
tendency to yellow with age and its general inferiority to cupronickel
from the Mint standpoint. The upgrading of the 5-cent coin mat«ri^
that would occur with cupronickel would, perhaps, not be an idetd
solutioD, nor is it an altogether attractive prospect to have 5- taid 10-
cent pieces of present size made from the same material. However,
all things considered, the preference here would be slightly in favor
of subsidiary coinage made from cupronickel, with the pr^wit 5-c«it
piece unchanged. The alternative of leaving the present 6-cent piece
unchanged and using nickel silver for the subsidiary coinage would
also be acceptable.
The cupronickel or nickel silver clad on a copper core has the great
advantage of avoiding the need for modification of vending ma-
chines. The Inco coin does not work acceptably and even if it did
it would be superior to the clads only on the basis of appearance. The
clad coin is to be preferred since it would lead It^cally and easily
to a permanent coinage of cupronickel, or nickel silver, or, as seems
equally desirable, could be retained as the permanent coinage material.
Changeover Problems with the Base Alloys
While the announcement of a plan to switch to a base alloy lor
subsidiary coinage is not likely to cause intensified hoarding of silver
Digitized byGoOgle
COINAGE ACT OP 1065
259
coins by the public, the Mint must be prepared to offset any conceivable
scale of withdrawals. Similar considerations would apply in the
ca,se of reduced content silver coinage, and it will be recalled that
some of the arithmetic examples in Section V allowed for complete
replac^nent of the coinage in circulation at the time of the change-
over, whether or not the old coins could be recovered. Most of those
not recovered were assumed to have been hoarded. A crucial differ-
ence is that the prospect of a sharp increase in silver prices would
disappear, and the major threat to a smooth transition would be
removed.
However, the public may want to hold relatively large amounts
of silver coins; new ones because they are the last of their kind, old
ones because of enhanced numismntic value, real or imagined. This
could mean that a large part of the production of 1964 silver coins
might fairly rapidly, if temporarily, be withdrawn from circulation
along with an appreciable amount of older coins. The effective
countenneasure is a very high rate of production of the new coins
and their introduction in large volume. If a. silver 50-c«nt piece is
continued in production, the withdrawal of silver coins may well be
minimized.
Possible Need To Replace Existing Coinage
The net effect of these considerations is that, while side-by-side cir-
culation of the new and old coins is altogether likely, there are residual
uncertainties and the prudent course is to he prepared to replace the
coinage fairly rapidly, if required. The "replacement problem" with
a base alloy is very difficult from the case of a transition to silver coin-
age of reduced content. In that case, the situation was complicated
t^ the need to recover as much as possible of the existing coinage and
turn it out again in the form of lower content coins. With the change-
over to base alloy coinage, the problem is inherently a much simpler
«ie of rapidly achieving a rate of production sufficient to offset with-
drawals from circulation. Because the rate of withdrawal of the old
silver coins is difficult to estimate in advance with accuracy, the
Treasury must plan to replace much of the existing coinage and have
the capability to do it within a relatively short period of time. If
the coin shortage should ease by early next year, the changeover prob-
lem should be a relatively simple one. At the preswit time, planning
should go forward on the less favorable assumption that there will
still be a coin shortage at the period of peak demand in the second
half of 1965.
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260 COINAGE ACT OF 1965
Possible Interim Expanmon of 5-Cent Prodaction
Assuming for the sake of disciission that l^slation providing for
a new base alloy coinage were passed by late spring or early summer,
only a limited amount of the new coins could be produced by the
end of the calendar year, and their introduction should probably be
delayed until 1966. At the same time, the public might possibly be
making s(»ne net withdrawals of silver coin from circulation. This
could ccaitrihute to a tight coinage situatitm next year at about this
time (December). One step that can be taken even before the l^s-
lative consideration of the Treasury proposals is to plan for extra
production of 6-cuit pieces beyond the amounts scheduled imder the
current crash coinage program. The logic of such a procedure would
be diat whatever the eventual decision on the subsidiary coinage mate-
rial, extra 5-c«it pieces would be a valuable addition to the circulating
coinage during the difficult initial stages to the changeover.^
If it were considered certain that silver would not be continued
in the coinage, there might even be something to be said for a
reduction in the rate of silver coinage after the beginning of the
year. To the extent that this allowed increases in the rate of coin-
age of 5-cent pieces, coins which would stay in circulation would be
increased at the expense of coins which possibly might not to the
same degree. There are, however, difficulties with such an approach.
A much larger number of 1- and 5-cent pieces must be produced to
carry on a given dollar amount of commercial transactions. Fur-
thermore, such a shift might cause some disruption in Mint produc-
tion schedules. For these reasons, it probably is better to plan to
continue to produce silver coins at fairly high levels up to the time
that a switchover is made to a new subsidiary coinage alloy.
This would not, however, preclude some intensification of the pro-
duction effort next year on 6-cent pieces, at the expense of 1-cent
pieces. It is understood that the Mint will have considerable flexi-
bility in this respect as new presses already on order are delivered.
A further but more far-reaching effort along these lines would bo'
the establishment of additional temporary facilities which could be
used to produce cupronickel 5-c6nt pieces from purchased strip and
rapidly shifted to the production of subsidiary coinage at a later time
in the year.
Possibilities of this sort have been canvassed thoroughly on earlier
occasions when planning the current crash coinage program. Great
progress has been made along these lines. Approximately 50 coin
stamping presses and additional blank annealing and cleaning lines
' As U DOW amplr cleir (Haj ie6B), the UlDt'i craib coinage proKram tui been eml-
nenUy succeBsful In OTercomlnc the sbortage of 1-cent and B-cent pieces and baa baUt ap
tbe Bort of backloB referred to In the teit.
Du,iiz=db,Googlc
COINAGE ACT OF 1985 261
are on order, and it is understood that further 10-coin stamping presses
are about to be contracted for. However, the changeover to a new
coinage alloy may mean that even higher levels of coin producing
capacity will be required until the new Philadelphia Mint comes on
stream. If so, there probably is a need to reexamine the possibility of
seeking authorization to obtain additional space where supplementary
minting of coins from purchased strip could take place. This might
involve the installation of coin-stamping pre.sses in the present San
Francisco building, or in temporary facilities elsewhere, or both. In
any event, "outside" operations should remain under Mint control
and jurisdiction.'
Dimensions of the Changeover Problem
Some rough idea of the production effort that might be required
to insure an efficient changeover to base alloy coinage can be gained
by reference to the volume of subsidiary coin estimated to be in cir-
culation at the time of the changeover. Table 1 presents approximate
estimates of the number of pieces of subsidiary coin that will be in
circulation at the end of calendar year 1965 and their face value.
These estimates supplied by the Mint are lower than those that would
be carried in the Cirdulation Statement, but higher than those implied
by the A. D. Little estimates for January 1963 based upon the age dis-
trihution of a selective sampling of coins by the Federal Beserve
banks. Further internal studies of the amount of coin in circulation
should probably be made by the Treasury, but the present estimates
are adequate for the purpose at hand.
One dimension of the changeover problem is simply the total amount
of base alloy coins that would have to be produced in order to re-
place silver coins now in circulation. There is every reason to be-
lieve that there will be extensive side-by-side circulation of silver and
base alloy coins. However, to be entirely secure, plans should be made
for the full replacement of the existing coinage. Another dimensicm
of the changeover problem is the peakload production that will be
required in early stages of the changeover when withdrawals of old
coin would possibly present a problem. Complete replacement of the
more than 12 billion pieces of outstanding subsidiary coinage with
base-alloy coinage would probably take about 3 years. This assumes
that 1- and 5-cent production would be continued at roughly the rates
now scheduled for fiscal 1966 and that the remainder of Mint facili-
ties would be shifted as rapidly as possible to the production of base-
alloy coins with the maximum feasible reliance upon the purchase
of strip. Heplacement could be accomplished even more rapidly, if
existing and planned capacity were to be expanded.
<Tbe Treamir'i propoted Ie(1slftaon Inelndei antliortutlon to mrame th« mlotlnf of
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COINAGE ACT OF 1868
Tabia 1. — Bttimated Subsidiary Coin in Gircvlation at End of
Calendar 1956
(uSSw
«?-
1,233
3,317
7,8«
SS16
784
12,394
8,3»
Full replacement of the existing coinage is hardly likely to be oblig-
atory vrithin 3 years, but this does set an approximate upper limit
on the overall production task. What does seem likely to be required
is the ability to reach peak rates of production very quickly in <^er
to offset any net withdrawals of old coin in initial stages of the trann-
tion. This does tend somewhat to increase the attractiveneflB of
cupronickel as the subsidiary coinage material since the Mint is thor-
oughly familiar with its processing, no period of ezperimentaticMi
would be required, and dependence upcni outside suppliers would be
minimal.
Purely for the sake of illustration it may be useful to ctmsider the
timing of a shift to cupronickel subsidiary coinage. At tiie time of
writing, it is not possible to evaluate a similar changeover to cupro-
nickel clad coin, but the Mint is examining the problem in depth and
detail. In the case of straight cupronickel, if the Mint were able to
commence full-scale production of subsidiary coins by July 1 of next
year, it might be possible to produce as many as 1.9 billion pieces by
the end of the calendar year. The maximum annual production rate
would be 3.8 billion pieces of cupronickel subsidiary coin with esdsting
production facilities and approximately the existing distribution
among 1-cent, 5-cent, and subsidiary coin production. If this maxi-
mum rate could be quickly achieved, a little more than 15 percent of
the outstanding amount of subsidiary coinage could be replaced in the
first 6 months. If the coin shortage eases early next year, this rate of
replacement of subsidiary coin should he entirely adequate. Still,
there is much to be said for an immediate effort to provide an even
larger temporary productive capacity, and if there is continuing evi-
dence next year of a coin shortage, some action will be obligatory.
The leadtimes for expansion in coin-producing capacity are l<mg, and
deliveries of needed equipment and materials are sometimes uncertain.
However, the Mint's efforts under the crash coinage program have
been prodigious, and, if required, they undoubtedly can expand thur
capacity ev&i further.
Digitized byGoOgle
COINAGE ACT OF 1965 263
Vending Machines and the Changeover
The possible need for very intensive production of the new coins
is complicated by the vending machine problem. Where the new
coinage material did not work in present rejectors, there would be two
extreme alternative courses of action. In one the vending machine
constraint would be accepted and coin production would be adapted
accordingly. Production of silver coins would be continued at high
rates while vending machines were being modified and parallel pro-
duction of the new coins was begun, but the introduction of new coins
would be delayed imtil vending machines were fixed. The objections
to such a program are obvious. Even if vending machines could be
altered in less than 2 years, the drain on silver stocks during that time
could be very great. Furthermore, it would be extremely difficult to
arrange for the parallel production efforts on old and new coins with-
out running the risks of a divided effort and inadequate production of
both.
The other alternative would be to commence production of the new
coins as soon and as rapidly as possible and place them in circulati<ni
without awaiting the modification of vending machines. This would
have the advantage of not continuing the production of silver coins
at a time when many of them would go out of circulation as soon as
they were issued. The obvious disadvantage would he the fact that
new coins would not work in unaltered vending machines. While this
should, in fact, tend to keep some additional amounts of old coin in
use, it could hardly fail to disrupt machine merchandising and greatly
inconvenience the public. In early stages of the transition, new coins
would still be a small fraction of the total amount of coin outstanding.
If vending machines could be altered rapidly, and their operators
would have some incentive to do so, the changeover might be achieved
without dire results. Wliether such a program could gain legislative
approval, or should be recommended, is another question entirely
which will not be examined here.
The Transitional Coins
The obvious attractiveness of the clad and Inco coins, is the po-
tential they offer for avoiding the vending machine problem. Intro-
duction of the new coins into circulation could proceed as rapidly as
they could be produced. The critical factor then tends to become the
leadtime required to obtain adequate amounts of the Mint input —
clad strip or annealed Inco blanks. While successful resolution of
vending macliine difficulties is highly desirable, it will be necessary
to guard against attaching too much importance to that single ob-
jective. The supply of the material for the transitional coin must be
completely assured. Otherwise, there is a danger tliat a high rate
87
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264 COINAGE ACT OF 1960
of production could not be sustained. This could potMitially even be
more serious in its overall effects than the difficulty with vending ma-
chines that would result if ordinary cupronickel coins were used.
Tnco apparently has the capacity to malcB the required amounts of
strip but the Mint would need annealed blanks at least initially. Eren
if the Inco coin were satisfactory in other respects,' assurance would
be needed that adequate amounts of blanks would be forthcoming,
and that tliey could be struck on existing Mint equipment. Similar
considerations apply in the case of clad strip upon which the details
of assured sources of supply were not available at the time of writing.
Battelle has recommended tliat the Mint initiate an exhaustive in-
vestigation on this crucial point and just such an investigation is un-
derway.
Melting, Hoarding, and Export Controls
Brief comment will be made on the role that melting, hoarding, and
export controls might play during the changeover to a base alloy, al-
though full examination and analysis of the problem will not be at-
tempted liere. It may be desirable to obtain standby authority for
the Secretary of the Treasury to institute controls over the hoarding,
melting, and exporting of silver in the event he determines certain c(hi-
ditions occur. But, with the possible exception of export controls, the
usefulness of such controls as part of an orderly changeover appears
questionable; rather, their function would appear to be that of em«r-
gency maneuvers to be taken only if the possibility of holding the
silver price through sales from our own stock during the critical
changeover period is seriously threatened. If the changeover is started
soon to a base alloy, this threat will undoubtedly be avoided.
The purpose to be served by controls over the melting of coin if
the Treasury is able and willing to hold down the price of silver is
questionable, since there would then be no incentive to melt coins.
Furthermore, the prohibition of melting at the same time as the price
of silver is being held could foster the misconception that the price was
shortly going to he allowed to rise, and stimulate speculation in
bullion.
Melting controls might be obligatory in a "last ditch" effort to main-
tain coin in circulation where the Treasury had tried to hold the price
of silver, but then ran out of silver which could be sold in the market.
In general, this would not even seem to be a remote possibility wha«
the transition is to a base alloy, rather tlian to a reduced content silver
alloy. Moreover, while melting controls could be required under some
circumstances, too much should not be expected frcan their applica-
tion, since a prohibition on melting could not effectively prevent
hoarding under those circumstances.
■dbyGOOgIC
COINAGE ACT OF 1985 265
Controls over the hoarding of coin, while perhaps conceivable in
theory, \Yould be extremely difficult to enforce effectively. It is hard
to see just how controls could be designed which would discriminate
successfully between prohibited hoarding and the accumulation of
coin in the ordinary course of business, and in coin collections. Pos-
sibly, penalties for coin hoarding could be devised that would limit
lai^ accumulations by professional speculators, and such controls
might play some part in effecting the recovery of old silver coin in the
tran^tion to silver coinage of reduced content. Even this se^ns doubt-
ful, however, since a legal apparatus effective in dissipating large
hoards would seem almost certain to encourage even more widespread
"family" accumulations. While the question deserves fuller discus-
sion and analysis than it will be given here, there does not seem to
be much value in controls on the hoarding of coin. Controls on the
hoarding of bullion might conceivably be more effective.
There is a stronger case for export controls during a changeover
period. Certainly, they would be an essential backstop to any con-
trols over the melting or hoarding of coin. But if these controls are
not used because the Treasury is holding the market pnce of silver,
the case for export controls on silver ismuch less clear.
The only situation in which we would want to prohibit the export of
silver bullion would be during a period when there was heavy foreign
speculative demand, which added to the drains on Treasury stock — as
was the case temporarily in the latter months of 1964. However, one
result of applying export controls would be a partial separation of the
U.S. market from the world market, and there would be some increase
in world prices above the pegged U.S. price. As a consequence, some
U.S. domestic demand for silver, previously met from imports, would
now be met from Treasury stocks, a cheaper source of supply. By
frustrating the foreign demand for Treasury silver, it could be argued
that some net saving would arise. It should be recognized that silver
users would probably regard the separation of U.S. and world markets
as a threat to their assured sources of supply. If ib, export controls
might stimulate silver users to make precautionary purchases of
Treasury silver in advance of their currwit requirements. The fact
that, aside from speculative demands, the United States is a natural
importer greatly increases the possibility of this response to a higher
world price.
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COINAOE ACT OP 1960
VII. Conclusions and Recommendations
1. Cupronickel is the best permanent material for a new subsidiary
coinage, ignoring; the vending machine problem. A close second
choice would be nickel silver for 10-, 25-, and 50-cent pieces.
2. Either cupronickel or nickel silver coins would require "factory"
adjustment of sophisticated vending macliine rejectors, entailing sig-
nificant costs and transitional inconvenience. This may not be ad-
judged intolerable, in view of their advantages in other respects.
However, since extensive experiments confinn that cupronickel (and
probably nickel silver) clad on a copper core operates successfully
in unaltered vending machine rejectors, preferable opticMis are avail-
able. A clad coin can be used during a tnuisition period, or perma-
nently.
3. Information on the wear properties of clad coins is altogethN'
encoura^ng, and they undoubtedly meet all the requirements tor per-
manent use in the coinage. If desired, they could, with equal facility,
serve as a transitional coin while further study and research on the
adaptation of vending machines was being conducted. An overriding
requirement with clad coins is the production feasibility of the strip
and the assurance of an adequate supply for processing in the Mint.
4. Because of a number of unresolvBd questions, the Inco coin comes
into the picture only if an assured supply of clad strip cannot be ob-
tained. In any event, the Inco coin would have to have demonstrated
conclusively that it would work in vending machines with minimal ad-
justments, that it could be struck successfully in large volume on exist-
ing Mint equipment, and that adequate supplies of strip or annealed
blanks would be available
5. Subsidiary silver coinage of reduced c<»)tent, such as silver-
copper alloys clad on a low-content silver-copper core, suffers both
from difficult transitional problems and incomplete assurance that the
subsidiary coinage would not be imperiled again within a fairly short
period of time. The danger of a complete breakdown during the
transition period cannot be ruled out, and the use of silver through-
out the subsidiary coinage should not be viewed as an eligible option.
If any silver is to be retained in the silbsidiary coinage system,^ it
should be limited to the silver dollar and to a clad 50-cent piece of 400
fineness. In any event, the retention of the monetary value of the sil-
ver dollar at its present fineness is absolutely essential to a successful
transition.
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COINAGE ACT OP 1965 267
6. During the transition to a new coinage system, it will be obliga-
tory to hold the market price of silver at its current level in order to
protect the existing coinage. Since this will remove the incentive to
melt the existing coinage, controls over melting would probably not
serve any useful purpose. Effective controls on the hoarding of coin
appear impractical. Controls on the export of silver coin and buUicm
may serve a useful purpose during the transition period. There is
something to be said for having standby authority to invoke controls.
A prompt transition to base-all<^ coinage would make the actual use
of controls unnecessary.
7. Kew coins should be placed in circulation through normal chan-
nels. Every effort should be made as soon as possible to prepare for
extremely high rates of production of the new coins. This should
include an interim expansion in the production of 5-cent pieces (which
would provide substitutes for silver coin and subsequently release Mint
capacity for the new coins) and arrangements for additional tempo-
rary production space. If this were to be outside of existing Mint
facilities, it should remain under Mint control.
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FINAL REPORT
February IZ, 196^
BAT TELLE MEMOKIAL
505 King Avenue
, Ohio 43201
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270 COINAGE ACT OF 1966
Battelle Memorial Institute • columbus l«bon«toiiics
2fiB-SISI - CABLE ADDRESS: BATHIH
I-ebnikiy 12, 196S
Director ol the Mint
U. S. Treaaury Departi
Waahington IS, D. C.
no aingle material waa fouod which could entirely aaliafy
ectlve and objective onea. We balieva, however, that the
praaent lalialttctory compromiaea that conalder the many
ought to light by our inveatigation.
The other Battelle
itaU. ax well a« other n
atafi members join me in eicpreaaing thanlca lor 1
)rk on thia projecl. We have enjoyed worldng wit
lembera of the Treaaury Department ataff.
Pleaae c.U upon u
a if we can be of additional aaalatance at any time
Very truly youra,
H. J. Wagner
Aaaociate Chief
Ferroua and High-Alloy
Metallurgy Diviaion
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OOINAGB ACT OF 190S
ACKNO WL£DGM£NT
The aalhorm wi»h to thank the Bureau of the Mint and the Tr«»«ury Dep
this reporl. In addition, the contributiong of varioui Battelte (Caff members
Department ol Msteiiali EngineeTing. Department of Economici and tnfarmj
Research, and Department of Proceti and I%yilcal Metallurgy are appreciai
»umeri, silver producers, coin-selector mani
activated machines are gratefully acknowledged
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272 COINAGE ACT OF 19S6
TABLE or COMTENTS
SUMMARY
lNTRCtt>UCT10N
CRITEHIA FOR SELECTING ALTERNATIVE COnUCE MATERJAU . .
OUTLOC« FOR THE AVAILABILITY OF SILVER AS A CODUCE
MATERIAL
AVAILABIUTY AND COST OF VARIOUS METALS CONSIDERED
AS ALTERNATIVES TO SILVER IN COINAGE
PHYSICAL, CHEMICAL, AND MECHANICAL PROPERTIES
MINT OPERATIONS AND THEIR RELATIONSHIP TO ALTERNATIVE
COINAGE MATERIALS
COUNTERFEITING, ILLEGAL DUPLICATION, AND SLUGGING . . . .
PC6SIBLE CHOICES OF MATERIALS FOR U. S. COINAGE
PRELIMINARY EVALUATION OF MATERIALS FOR SUBSIDIARY COINS .
ALTERNATIVE CHOICES FOR VARIOUS DENOMINATIONS OF COIN . ,
POSSIBLE ECONOMIC CONSEQUENCES OF A CHANGE IN CCHNAGE
MATERIAL
CONCLUSIONS AND RECOMMENDATIONS
SUPPLY -AND- DEMAND OUTLOOK FOR SELECTED METALS CONSIDERED
AS ALTERNATIVES TO SILVER IN UNITED STATES COINAGE A-1
APPENDIX B
SILVER SUPPLY AND DEMAND B-l
APPENDIX C
COIN-OPERATED DEVICES C-I
APPENDIX D
MINT OPERATIONS D-1
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COINAGE ACT OF 19B5
Public »<:<:
eptability
Phy.ical,
Effect o» <
:om-operited devJ
Effect on .
Hint operation.
Counterfei
ting, illegal dupli
No material can entirely saliafy all the criteria, though certain material! are
outJtandlog in one reipecc or another. For example, the preaent sUver-copper alloy
is excellent in every reipect except that it doeg not gatiaiy the availability and price
criterion. The atudy indicatei that the Treagury diver gtoctii will bo depleted In 3 to
judged thai a limit of about 15 per cent Bhould be placed on the gilver content of the
of time to serve 1b a means of preventing a riae in the price of .ilver.
Cupronickel (75 coppeT-25 nickel) ig attractive from the etandpoint of the transi-
tion to the new coinage, because of the ease with which it could be adapted to Mint
operallooa. However, it would not be completely acceptable in coin-operated devices,
degired, would be the use of a composite material. One such material is a sandwich-
like combination that combines into outside layers, elements of appearance and, in Its
core, physictd properties th^t make the composite completely compatible with present
11 is recommended that a composite material be adopted consisting of a 75
coppe[-Z5 nickel alloy on the outside and a core of eoj^er. It is alto recommended
Ihat the Mini take whatever steps are required to eatablish the availability of tha ma-
terial and the feasibility of maintaining quality control under mast -production
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COmAOE ACT OF ISSS
U the multilayer
■lloy.
If tb> rctinUon ol ■!!¥»
any of the other objective!, It
One it to use etlver in the ^O-ccnt piece only, by makliig a multilayer compaiUe con-
■iatlng of SO allver-ZO copper on the outiide, and s low lilver-coppcr alloy in the core.
The other option la to spread the silver evenly throughout all subsidiary denoxninationB
by making a composite conitstlnB of the 40 eilver-SO copper-3 nickel-5 sine alloy on a
silver -bearing copper alloy core. It la further recommended that the ailver-containli^
coloSj if adopted, be changed to the 75 copper-25 nickel on a copper core on July 1,
I9TS, oral such tlnu >• the Treasury ctoek of silver reaches a prcdMermiiMd
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COINAGE ACT OF 1968 275
During the pait
Ing so rapidly Ihat Iherc is danger that the supply of silver from the Tre
and mine pioduction will soon not be adequate to fulfill the combinEd nee
induBtry, ind defen.e.
and engineering judgment. Thi* study did not delve deeply into the political or economic
consequences of a change from our present silver coinage to some other alloy, eneepl
where such effects are closely related to the choice of a particular metal or alloy.
producers, silver consumers, and economists that the available Treasury stocks of
sUver for coinage wUl be depleted in the not -Coo -distant future. The area of disagree-
o light. Most of these suggestions are based
ions both for lowering the silver content of tl
intlrely. However, suggestions have also be.
n into account in judging Che suitability of various candidate metals, alloys, or
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COINAGB ACT OF 1965
Availability and price
Public acceptability
Fhyiical, chemical, and mechanical propertiei
Effect on eoin-operated devices
Effect OD Mint operatioea
Counterfeiting, illegal duplicallon, and slugging potential,
riteris are discussed in detail In the next *ectlon of this leport.
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COINAGE ACT OF 198S
:erla for rating candidate materialt are lifted below and die-
It ie believed that sll of the imporUnt factora governing the
oy are included.
■ the present predicamenl in silvt
■supplyofeUver. It i» moet imp>
ivsilable at reaeonable price and
of suppliers, and Government ttockpiles for defense purpoies. From the standpoint of
inlernalional poHtica and economicH, it would be best for the source! of supply lo be in
tinenl. Under all but the moat eiftraordinary circumstances, this would insure the
Judging from the widespread attention paid lo the current problem in the public
press, and the feelings expressed by members of Congresg and other Government
porcant factor. Acceptability to the public, however, is B subjective criterion which
were available, a public poll using carefully chosen sampling techniques might provide
some measure of public acceptability for a new coinage material. In the present report
Public acceptability, it is believed, is related to a number ol more easily recog-
distinguish genuine coins from counterfeit ones on the basis of such factors as color,
distinguish between genuine and counterfeit coins. It is quite likely that a coin which
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COINAGE ACT OF 1«S5
t poteniial and criteria [or mechanical, chemical, and pbyiical
alio relatid to both counterfeil patential and public acceptability.
civilization a> malerialj ol worth or e«t*em. Such matEriaU often lerve >■ media of
exchange. The markel value may or may nol be influenced by the utility of these ma-
because of their intriniic value. On Ihe other hand, fiduciary coinage [coinage whoi*
meul value i» 1«»» than its face value) has also been in common use. In (act, until
recently, U. S. lilvoc coinage has been eaientially fiduciary in nature. At the present
dollar actually contains one dollar's worth oi silver. Furthermore, in the other allver
coins (dimes, quarters, and half dollara], the silver market value has approachad tfas
face value. This trend is actually unfortunate. In effect, the high market value ol our
present silver coinage has become a liability. The reason is that it is now necessary
for the Government to prevent the price of silver from rising above the point at which
the metal value exceed* the face value of the coinage, at which point coins might be
melted down for their atlver content. This the Government does hy supplying silver
from its reserves at $L.Z9Z9 per ounce, which is the "melt point" of the silver dollar.
This silver-sales activity constitutes another serious drain on Governrosot sUver stocks
in addition to the unprecedented demand from coinage.
There is potential danger in any coinage material that might rise in market value
as silver ha* done. Technological progress results in ever-increasing demands (or
nearly all materials, especially lor metals and alloys. Thus, some technical advance
could make a significant difference in the supply and demand of any high-price material
used in coinage for ite intrinsic value. The situation now existing with silver coiild
then occur with other metals.
Public feeling with respect to intrinsic value in our coinage la perhaps aaaociatad
with tradition rather than a realization of actual metallic value. Arguments hav* baan
advanced both for and against coinage having significant intrinsic value. Evaluation of
theee arguments is a difficult matter and is regarded as lying beyond die scope of tba
d Mechanical Properties
rial. By contrast, the public -accepUbility factor
', since it depends on the public's altitudes rather
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COINAGB ACT OP 1966
It, The phyaical.
Color . For well over ISO years, the moat valuable denomlnatlonB of U.S. coing
copper aJloy. Therelore, it ie reasonable to eurmiae that the public will be more likely
lo accept a new coinags material for dimea, quirtora, and half dollars If the color ia
similar lo that of the silver alloy currently used for these denominations. If these coins
cause they would look like the U. S. one-cent coin, or the low-denomlnallon coins of
various foreign countries. A yeUow eoio (brass colored) might be more acceptable than
9 red one because there are no U.S. Iradiliona other than gold coins aasociated with
Density . The public probably is
that differs markedly in density from i
for the present silver-base alloy). The same reasoning would apply in the case of a
material much heavier than the present alloy, such as lead or tungsten. The public
probably associates "off weight" with counterfeit coins or play money. In spite of Ihi
cons' leratione, a number of countries now have aluminum coins. However, it must
recog.dzed that the problem, associated with Ihe introductior. of aluminum coins are
considerably different in these countries than they would be In the United States.
minimum weight to actuate Ihe mechanisms. A coin that is too light is undesirable.
For example, a metal should be soft and ductile enough so that it may be readily rollec
blanked, and coined. At the same time, It should possess enough wear resistance after
coining to have a useful liie in normal circulation of about 25 lo 30 yean. The harder
the metal the better the wear resisUnce. On the other hand, as Ihe hardness increase
the "coinabilily" decreases, and fewer coins can be made with a given set of dies
Hence, some compromise is called for.
ance after having been in circulation a while. In addition, the :
ssenlially nonreactive and nontoxic if accidentally swallowed.
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280 COINAOE ACT OP tflOS
Th* unique ring of the preeent «ilver coini cinnol ba overlooked at an anti -counterfeiting
factor. Moreover, lome emphaaii has bEcn placed upon it in recent publicity re-
leases. Technically, metallic ring is probably aiaociated with the moduluj at elasticity,
ing. Regardless ol its physical nature, a metallic "ring" Is associated by many people
Physical Properties . Among the physical properties of coins, the electrical and
magnetic properties have a profound effect upon their everyday usage as media of eit-
Efiecl on Coin-Operated Devices
The ability of coins to be accepted in coin-operated devices is considered aa a
separate criterion, even though basic physical properties, iueh as dsnaity, magnetic
coin-operated equipment has become a large industry in the United States. Nearly
candy machines, toll-road collect. on boxea, juke bMes, and many olhert.
Considered as individual industries, the two largest users of coins are th«
that in 1963, about 28 billion coins passed through vending machines*, while another 4
to 5 billion coins went into the pay telephones of the Bell System alone. ■•
All industries which use coin-operated devices have a large investment in coin-
the coinage alloy. The successful operation of this type of business depends to a large
degree on special devices, which are referred to in this report as "coin selectors" (see
Appendix C). Although these devices vary in degree of sophistication, their main pur-
pose is to accept genuine United States coins and reject all foreign coins*** and slugs.
An essential feature of their ability to discriminate between good and unacceptable coins
is based on the fact that United States coinage is nonmagnetic and has cerUin definite
values of electrical resistivity. If the material selected to supplant the present sUver
terial that may be recommended should be usable in the present coin-operated devices,
with the minimum amount of disruption in business or alteration of equipment.
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COINAGE ACT OF ISflS
^ifact on Mint Operationa
Two Mints arc now in operation, one in Philadelphia and one in Denver. They are long-
eslabliahediacilitieB, and are geared Bpecifically to handle the melting, rolling, blank-
ing, and commg ot copper- and silver-base alloys. Thus, in effect, each Mint la an
integrated unit with essentially "in house" control of all steps in the process o( making
coins from melting to the final Inspection, counting, and sacking operations. The
nature of the operatmg facilities at each mint, particularly at the Philadelphia Mint,
imposes certain limitations on the kind of coinage alloy thai can be handled. Much of
the equipment is old and of insufficient eapaeily. However, this is not a serious
obstacle at present because only three simple allays are processed, as shown in the
Alloy Compos ition, per cent
Quarter 10 90
Half dollar 10 90
Each of the three alloys is relatively easy to melt and cast into rectangular ingots in
the Mints' melt shops. The alloys are also easy to roll, and require no hot rolling.
between cold-rolling operations are available, however. Because the cast metal slab
are relatively ^mall, no heavy breakdown rolls are used.
be equipped with modern hlgh-capacit]
not be ready for operation for several years. If Congress authorlEes a substitute Coin-
age material during 1965, the new coins would necessarily liave to be made in the
present Mints. The Mints could, of course, buy strip from outside vendors if the new
alloy were difficult to melt and roll, but the material would still have to go through the
Counterfeiting. Ulegal Duplic
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COINAGE ACT OF 1906
Bfined as the clandeatine manufacture of replicaa or reproductiona of United Stat<
gn, but in lowei cost metala. That counterfeiting and illegal duplication have n
little profit potential for the effort expended in
(Z) Duplicating of Che silver coins (dimee, quarters, and
half dollars) is made unprofiUble because oi the high
intrinsic value of their silver content. The color.
le metal or base-metal alloy is selected as a Bi
;e, the incentive for illegal duplication will incr
■fill be much greater than the market value of il
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COINAOE ACT OF 1965
e World War 11, world conaumplion of ailvcr has exceeded pioduction, the
ing been drawn from atocks. Most recently, the depletion of chii atocfc hi
Mul two-thirdi of the :
in 1 deficit of Z09 millio
Iver production for that
of allver i* centered in
of Troy Ounce »
Deficit (1
ZtZ^^U.
(IBf
in)
(:
13)
(209)
(i» Noi.1
M. .11 -««.«.
1- nitmd » m UU.
npon in m
c«.
Dataeho
w that Che
Free World d.
elicit in ■
ilve
rii
1 1964 wa
■ J41 millioTi
«ilv.
r inU. S.
M^hich wa. 102
I million 1
in 1964, 1
therefore wi
equal
to the 21
5 million I
<uncei of .ilv.
■.T produc<
fdii
.e Free W
orld for that
Iti 1964,
ae in prev
iou. yean ir
»»l of thi
■ F'
mr
World d*
ficil wsi m»
wilhd
rawal. fr
om the U.
S. Treajury ,
■lock of n
lUi
■y lilver." Thi. ii i
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COINAQE ACT OF 19«S
Total Free World deficit (19t4)
Withdrawal) from U, S. Tieatur'
Sub.idiary Coins B«
Hademptiona of Silver Certilical
Net Change
ToUl Stock of Silver, U. S, Treasury,
December 31, 1963 'l, 584
ToUl Stock of Silver, U. 5. Treaaury,
December 31, 1964 l.ZZO
Net Change (364)
The nee withdrawal from the Trenury tor 1964, therefore, wai 364 million ouncea,
Thi* forecait then aervea a* a baaia for evaluating alternative* for alleviating th*
projected acareity of the metal.
In Appendix B a projection is made of the life expectancy of the Treasury itock
of silver baaed upon total Free World supply and demand for lUver in future years.
Thia foreciHl combines conditions of high Free World productivity (higher than the
average over the past 15 years) of silver with only moderate increases in demand [2 per
the Free World, together with decreasing coinage in other Free World countries.* The
uncerUinty of the forecast of future demands for U. S. coinage is reduced through the
mand. Table 1 is a sumnuiry of the results of this forecast.
The table shows that should the present demand for coinage peralat, the U.S.
change in the present 90 silver- 10 copper alloy. U the silver content of U. 5. coins
1975, even under Che tcwesi level of expected coinage demand. However, tb* life of the
Treasury stock could p«Bsibly be extended to 1979 by reducing the silver content of coins
to 15 per cent.** Eliminating silver from U.S. coinage altogether might extend this
stock through 1983.
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COINAGB ACT OF 1A6A
285
TABLE 1. SUMMARY SHOWING YEAR IN WHICH U.S. MONETAJIY STOCK OF
SILVER WOULD BE EXHAUSTED, DEPENDING ON THE SILVER
CONTENT OF THE COINAGE AND THE DEMAND FOR COINS
All.
"!'
. SU.., Q.»,.nl
0,1... ,., ..».!•)
L«v«l of Coln»Ke D.nand
90
50
JO IS
196^ 1971 i974('') l???!*")
1969 1971 1973 1976 1980
lU. Low Leve
d beglnniag eitly
1973 1975 1977 1979 1983
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COINAGE ACT OF 19011
AVAILABIUTY AND COST OF VARIOUS METAl^
CONSIDERED AS ALTERNATIVES TO
SILVER IN COINAGE
1957 in tbe manufBcturc oi U.S. coin*. The increxe tn demand for capper and tilver
lelacively smail proportion ol thn tolil production »nd cansumption of the metal in Che
U.S., while the conaumption of «ilver in U.S. coinage alone equal* total world praduc-
■ elcction of an illernative materisl for coinasr U Ihe cuirenUy available and potential
ti>in>, il is palntles* lo uee such a metal regardless of its technically desirable
ZZ.b for osmium. Conceivably, high-denalty elements could be used a* alloying ele-
nientfi to adjuBl the density of some possible low-densily metal lo about the desired
value. Some of the elements are rather pointedly inappTopriate for coinage. For ex-
earCb metals were not conbidered because oJ their extremely limited availability.
Radioactivity, present in the uranium and transuranium elements, even in harmless
amounts, would undoubtedly be a reason for low public acceptability of these metals aa
metals mainly because they do not meet the criterion of availability. Other pertinent
reasons for rejection are also mentioned in the text,
has considerable strategic value. II is obtained mostly as a
by-product of line production. The United Slates meets much
of its requirements by importing.
Coba lt. Practically all of the supply oi this metal is outside of
the United States. For e^tample, a large proportion comes from
the Congo. In the event of a prolonged emergency, the supply could
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287
suoi IJOMS 0001
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COINAOB ACT OF 1965
TABLE 2. METALUC
CONSIDERED
Palladium
FlatlBuin
Rhenium
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COTNAOE ACT OF 1D6S
Hafnium . Hainium lua a very high melting point {3900 F) and
if produced *.( • by-product In th« preparation of tirconium metal
lor nuclear- reactor purpoiea. The melallurgY la auch that the coat
of aheet and bar material ia about S13S per pound. The bulk of the
limited production of hafnium ia allocated to nuclear -reactor uae.
It can be uaed only aa an allaying addition.
Indiun
eaium . Thia metal ia very plentiful in the ocean, tt i(, howi
mcly low In denaity (1. T grama per cubic centimeter). The
int, auch aa magnedum in contact with copper. Ita reaiatanc
ia low and it cannot be recoininended for coin purpoaea.
Palladium . The price of palladium la higher than that of gold, and
the quantltlei are very limited.
Other Precioua Metala; Platinum, Rhenium. Rhodium. Ruthenium.
Tantalum . About 99 per cent of the tantalum orea proceaaad in the
U.S. are imported from the Eaatern Karalaphere. The reaervea are
quite limited. The coat of aheet ia currently about S50-$T5 per pound.
Its deniity ii greater than that of lead.
Vanadium . Thia metal ia difficult to prepare in high purity and ha* a
high melting point (3435 F). b ia uaed moatly aa ferrovanadium (an
iron-vanadium alloy) which la the principal aource of vanadium for
alloy Bteela, It baa practically no-uae aa the metal or a« a baac for
alloying. The United SUtea ia a major world producer of thia element
but the coat of the metal in (heet and bar forma ia preaenUy about $40
per pound.
The metala remaining aa capdidate poaaibilitiea for coinage require more
snaive appraiaal from the aUndpoint of all important criteria. Certain of theae
ala may be conaidered very improbable if uaed alone, but they might be uaed aa
itiona to alloya made up of two or more clemcnta. Thia poaaibUlty ia diacuaaed
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COINAOE ACT OF 196S
Chromium . Mod of the *vailsblc chromium or* It In the Mitecn
hemliphere. The metal 1> generally cUiilfied ai a strategic or
critical material in the United Sutel. The pure metal ii diiflcult
to prepare and !■ little used except ■■ a thin-plating material.
However, the availability of chromium ai an alloying element
appear! firm enough to allow italnleie ateel to be definitely
mbium . Columbium metal, exce
ibalt alloyi and tt«ela hat, until
Lately it hat
metal for high-ti
ore it found outtide the North American coi
of low-grade ore occur in Canada (now bein
the United Statea. Very large low-grade depoaila exiit in South
America, but much ai the present production it from Africa. The
production oi the metal in 1964 waa only about 25 to 30 lont. However,
induatry repreienUtivei eatimate that the present production capacity
The metal haa tome good qualltica for coinage, luch at excellent corro-
sion resistance, good coinability, and relatively high density (8.6 grain*
per cubic centimeter). Itt color it gray but not unpleasant. The currant
price of columbium sheet and strip ia higher than that of silver but this
could hf reduced at a higher rate of production reduced the cost. In
tplte of the price and present supply picture, the metal has a potential
The United States is believed to be i elf- tuff ic lent in thit
leeable future needs. The present price it about
$10-15 per pound for theel. Most of this metal is now being used la
The foregoing gcreening proceat indlcatet that the metalt chromium, cotumblum,
and poaiibly zirconium deserve further conaideration either as minor alloying elements
or for ute in esientiglly the unalloyed condition for coinage. The metallic alaments
Aluminum Molybdenum
Columbium TiUnium
Copper Tungsten
Of thete mecala, chromium, manganese, sine, molybdenum, and tungsten are
idered mainly as alloying elements. For example, the present one-cent coin con-
> an alloy addition of S per cent linc. This quantity of ainc it small compared to
otal supply and compared to the total amount consumed in the United Sutsa.
An appraisal of the aupply and demand for each of these metalt (with the exceptioi
on) is contained in Appendix A. Thit appendix includes data on the requiretnentt
ivailablllty of each metal, covering the period from I960 to the year 2000.
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OOINAGB ACT OF 1966
PHYSICAL, CHEMICAL. AND MECHANICAL PROPERTIES
A aurvey of the remaining 12 elemenCH discusHCd in the foregoing lectlon (luiwad
thai, for the foreseeable future, the elemenH silver, chromium, manganeee, molyb-
coinage. The elements iron, copper, nickel, aluminum, columbium, titanium,
ilrconium, and varioui naturally occurring tubttancea used ia ceramicB and plaitlo,
ihould be given further consideralion for use as the major comtituent. in United Statei
coinage. ♦ From those candidate raw materials, tlien, must be lelecled the alloy, pure
meul, combination of metals, or nnnmetallic materials which will serve as a subslituU
for the present 90 silver- 10 copper alloy.
Before proceeding with the examiaatloD of possible substitute materials, it would
be well to discuss certain properties of the present coin'Sllver alloy as well as the
implications of these properties relative to the choice of a coinage material. This
alloy, which has been standard in the United States for so many years , has a pleasing
white color, is nonmagnetic, has a low electrical resistivity, and is relatively heavy.
The original basis for the U. S. choice of silver for a coinage alloy seems natural
enough in view of the long history of silver as a coinage metal and such desirable prop-
erties as ease of melting, roUing, and coining. That it is low in electrical coelstlvlty
distinguishing this alloy from many other alloys that could be used to operate coin-
actuated mechanisms. It is also interesting that the combination of white color, high
density, low electrical resistivity, and absence of magnetism is unique to the silver-
copper alloy system. Moreover, the alloys are easy lo process in the Mint*. No other
element or alloy has this particular combination of properties.
erties Needed in Coinage for
Coia-Operated Mechanisn
With coinage unchanged in size and alloy over so many years, Induttrlet based
on coin-operated mechanisms have had a chance to develop and grow,** Important to
the basis of electrical conductivity, density, size, and magnetic characteristics.
coins and slugs according lo a property represented by the product of electrical
resistivity and density. This product, for the coin-silver alloy, is about 21.6 microhm-
g/square centimeter, while for the 5-cent piece it is about 286. The eddy-cunent
many of its alloys, including brasses such as the 90- 10 copper-iinc alloy.
the pdiysical properties of a substitute material must be specified in such a way as to
make the behavior of the new material identical with present coinage in coin-operated
Q ilmm udUmiied tnxunti f»m the ocun tui u eUmlDired hum ccacldenilee si s cotugs mkio-
IK li^QKii sad poor c<no«loa rulfUnce.
Du,iiz=db,Google
COINAOE ACT OF 1965
ilor for U. S, coins|e ii largely ■ muttsr of public accepLajice.
S- BubAidiary coinage has been lilvery- white. Sugge#tfld alloyi
Croni tH* itandpoiiit.
■ been astocUted wicli (ubiiditry coiiuLge, copper- i*d liaa been
coini both here »nd abroad. Accordingly, it would aeem inad-
In Che long- range picture, in which plastici
distinctive colors could be deliberately chosen ai
a possibility must be considered quite drastic, h
A subetanCiftl number of metals and alloys cui be
pOBile", hi» been considered. Appendix C, Coin-Oper
When certain desirable properties cannot be reaJiied with a homogeneous male-
rial, they can often he met in composite systems. In conposite systems two or more
materials, each unable lo satisfy all the Fequiremenls, are combined in such • way that
the over-all behavior of the composite is sadafactory. One such composite is called a
"multilayer material", wherein tlie components are bonded together in sandwich fashion
in iuch combinations as to obtain the properties needed. NoUble examples of multi-
layer metal systems are the bimetallic thermostat alloys, the stainless- clad copper
pots and pans, and precious-metal-clad place for watch cases. Similarly, a multilayer
system for coinage material c^n be assembled as Uluscratsd in Figurs Z. With the
Some of the composite or mulCilayer systems considered for coinage purposes are tbe
following:
• Cupronickel (75 Cu-^S Ni) aad over pore copper
e Silver-copper alloys clad over cupronickel
e Silver-copper alloys clad over modified copper*
• High silver-capper alloys clad over low silver-copper alloys.
Digitized byGOOgIC
COINAGE ACT OF 1905
FIGURE 2. MULTILAYER COMPOSITE COIN BLANK
Each of tho compDaiCemaCerli
a white color. Thus, it on ba leei
that can aaCiafy both the public-acc<
product of alaetrlcal rsaiitlvitr x d
tail and alloya that might aatlafy Che
It be compatibte with pretent coinage in
3up of metals eoten the picture if the
Tabla 3 Uata a
number
r of <
candidate material
[a. The
arranj
emei
ind claa.lfiea-
tlon of the ma
1 are deaigned to i
andei,
l.ph»,
E the cbolcea
with regard Ec
. the cr
[teria of co)
lor (public acceplahllity) a
nd uaabllity
In
coin- ope rated
:rangan
;tlng require-
alloy -
aallafy. For exar
nple, if
a white
cole
a de tired
ragardl«a> of
the re.
iativlty
tmlty product on
nagnetii
rliea
. tl
lieo a rather
large number
of poia
er hand.
■tlvity
naity product latli
for col
ted device a,
there are only a few
poaaibi
liUe,
.. Laatly, ifaredi
liah colo
:pt.
.bl8, a numbei
of oopper-ba.
device..
e alloyi
.alia
ble which could al
iobemi
•do to.
.orkln
coin-operated
cua««a
the '
«riou. c«,did,te.
1 from the view
point
•P
re.ented In
Table 3. If it
ladaalredfoi
■ coil
n- ope rated devicei
1 to cont
oper
■atlon without
modlficatioaa
, and if
a whit.
! col
or la required for
public .
.ccepta
the following lw«
db,Google
COINAGE ACT OF 196S
R=qmr
Changes
n Coir,- Operated Devices
Opera
eif£ang'.s,inCom-
R=»i«.
Vi.y X D=n
itK Too High ar Too Low
Resistivity x D
MsglBtic
».™.,...u 1
Nickel
Chromium
itainleii
Resistivity X Deniity
Too High
Modified silver
Silver-copper
C^iper modified
-by the .ddlilon
oi nickel, .Ific
C a pro nickels
Nickel silvers
(copper- nickel-fine lUoys)
iron.
Columblum
"t^po^ite.
Nickel-5 silicon
Pla«d copper.
CHromium- nickel
• talnlBS* Steele
alloys'")
-
aofP-.W
Nickel-chromic
Monel
Titanium
^M»B>
Zirooniun,
imHHj
Ceramics
^^^^^1
Pla.Uc.
m
Resistivity X Densily
Alnrx^inun,
P^F^
Most sluminum alloys
Du,iiz=db,Google
CODTAOE ACT OF 1966 295
Silver-copper alloy* (depezbding on the lilver supply picture}
Varioua multilayer compoiitei such aa cup ronickel- clad copper.
modification of present coio-operated device! ie permissible, a wide variety of
lis is available lo cboose from. Nevertbeless, tba nonnutgnetic materials would
:rabU to the magnetic ones, in order to minimize the disrupIioD in the use of
erated devices. Lightweight materials such as aluminum alloys, plastics, and
::s would cause more disruption In the use of coin-operated macbices than would
Conaideration of Mechanical and Chemical Properties
The mechanical pioperties of the candidate* mus
must be high enough lo inaure good appearance over a 1
For the candidates listed in Table 3, the modifiei
permit their use, though if nickel, sine, aluminum or i
possible to obtain aatlstactory atceuglb and hardness,
(with respect to shattering) needa further study. The c
riaJa is very limited; notable in this respect are most i
titanium. Those aapects are discussed in the section t
Rclatioaahlp to Alternative Coinage Materiala .
!K eludes aluminum a!
db,Google
COINAGE ACT OF 1965
Any m>»rial taking Ihe place of the current lilver coinage alloy muat be capable
ot being handled by the Minla. It i> eaaential that the material b« adaptable to th* pres-
ent Mint racilitiee, eapacially with regard to coinabilily. Other conaiderationa include
upaetting (edge rolling), atrip rolling, and melting. A di*cu**ion of the United Statea
Mini fiLilitiet ii gtven in Appendix D.
Coinability refers to the ability of Ihe coinage material to take ■ aharp, clear Im-
■ aion, of the proper depth and deaign, when the preformed blank ia preaaed between
diea. ti ia alio important that the material poaaeaa good coinability under condi-'
* of high-apecd coining, without exceaaive die pretaurea.
ceptabl
! exper
fa)
e, with little or no change in
Cupronickel (TSCu-25Ni)
(b)
(c)
Puru nickel
Columbium
(d)
(•)
Multilayer or compoaite mat
Silver-copper alloya in all p
(f)
Nickel-5 ailicon alloy (requi
M
<ae mital* and alloyi Judged t
(b)
Zirconium
Titanium
(d)
•A,
>1.U>1»><.
d on experience and actual Mint triala of a
the following material* are Judged to be
ling methoda. Appendix D (ummarlxea
binaliona of cupronickel.
inge in annealing procedure).
wer coinability than Ihe above group
ight-chromium lypca and auatcnitic chromium-
db,Google
COINAOE ACT OP 1965 297
cai> change, such ■■ the addition of an annaaling treatmenl, or • changg in dctign
coining diSB, mighl permit tome o< th* quastionable material! to be aucceaafiilly
i. However, a die deatgn change ii not alwBya dealrable fiom Iha point of view of
erleiiing and illegal duplication, which arc di*cu*aed latet.
exist with cerlain maleriali during thia proceaaing itep. For example, the nickel-S
silicon alloy and the atsinlels ■teela work hardenad to an appreciable extent during
edge rolling. The aurfacas of the coin blanka near the edge tended to become hardened.
Thia, in turn, led to difficulty when the blanka were coined. The cold-worked area*
adjacent to the rim did not flow aufficiently in the coining die, and the lettering at thia
location did not fill out properly. In a case such as this, the annealing treatment ordi-
narily given the blanka before upsetting could be given instead to the upaet blanks,
layer compoaite materlali because of the softness of the core. Possibly, some Bdjust-
menta in the blank annealing treatment would be necessary to overcome these difficulties
or, aa suggested in the preceding paragraph, the annealing operation could be deferred
RoUin, and Annealing
Eiaentialty, the Minta are preaently limited in rolling capabilities to thoae of a
annealing in controlled- atmosphere [arnacca. Except for such metals aa eirconium,
cold roll moat of the other poaslble lubatilute alloya such as monel, stainless ateel, and
copper, or copper-base alloys, additional annealing facilltiea would be required. Roll-
ing of the 50 Bilver-50 copper alloy may require more annealing than wilt th* ')0 silver-
10 copper alloy.
To handle the rolling of such metals sa columbium, titanium, and eirconium, the
Mints would require high- temperature vacuum- annealing equipment. It would probably
be necessary to hot roll (ISOO-ZOOO F) columbium to break down the ingot structure.
This, in turn, would require conditioning to remove the contaminated aurface layers
Digitized byGOOgIC
COINAGE ACT OF ISeS
Z4
lilar mdtalB, a change in iiDiiigB for th« indactifm-meltlDg aqulpmeDt would
id. The melting procadurt and probably th« catting technique would alio n
I Id handle tbeae metala and aUoya properly. The melting of metala auch i
ium, (irconjum, and tllanium requirea apecial conaiimable-aic melting eqi
■ upply and control!. Columbium, which deaervea apecial cone i deration bsi
I vary well, would, for the preaent, have to be melted and rolled by an out!
Br and be eupplied to the Mlnca In colli for blanking and coining.
color by dipping in i
dipping in ■ mixture
for Inch procateae.
n, Tbul, for example, the 50 aUvcr-SO copper alloy ukea on a
i procaoing. The coin blank can be brigblanad to a eilvery-white
nitric acid aolution. Similarly, lirconium can be brightened by
>f hydrofluoric and nitric aclda. The Mlnta are not now aquippad
total Mint facilillea from melting tt
r-50 copper alloy
Mckel, nickel-5 aiUcc
Multilayer eompoaite i
I apply:
Bvolvad, tb«
d by the Mlnta, the fallowing
■ [.ee»l«o(2)»bove]
■dbyGOOgIC
COINAGE ACT OF 1065
299
chromium alloy
(PAGE 30 FOLLOWS)
Digitized byGOOgIC
COINAGE ACT OF 19flS
I varloii* criteila h«.v« bean applied to th« pots
found th*t no linglB mateTlal latiifiai Ul of th* cilterla. S«v*iU of
ttialt poaiei* cerUin daalraUe charactariatlc* oot poaaaaaad by
□thera. Specifically, the following materiala have been aelacted bacauaa they have car-
taln adviiiita.g«a over each of the others. Thay are dlacusaed further in the paragrapha
that follow:
Silver-coppar alloya, particularly $0 ailver-SO copper.
Cupronickela, particularly 75 coppei-Z5 nickel-
Copper -nlckal-alac alloya (nickel (liver*).
Columbium and alrconium.
•;
hlgh.i
-coppe
ilvot-(
-coppe
ralU
:oppe
c alloy,
<ye on .
:opper
1 on low ailver-(
:uproBick*l and '
6. Nickel and high-
nick*
1 aUoyi
Tb,.e»a,..
rlali are
diacui
laad further
below.
Silver
■Copper Alloy.
■liver-copper alloya are Chat such alloya have
The moit aerioua disadvantage of any ailver-copper alloya la that (hey do not
aatiefy the criterion of aupply and price. Aa ahown in Appendix B, any plan for long-
term uae of ellver [or coinage muel be conaidered ■> queitionable: the aupply and price
ia aaaured only aa long as the Treasury stocks are able to supply sliver for thi« purpoa*
Nevertbelees, If sentiment and tradition are considered to be compelling reaeona for
using a silver-copper alloy, then it would seem prudent to linilt the sUvsr content to
SO per cent, and to use the alloy for only one denominallon of coin. In this way the over'
■11 conaumptlon of silver would be about I6-IT per cent of the normal consumption and
might permit the Treasury stock* to last for perhaps 10 to 15 yeara, depending on the
coinage demand and apeculation.
db,Google
COINAGE ACT OF IflSB
301
10 ailvar-lO copper alloy. An acid dip would bg required to give the coin a good appear
ancB when newly mlntad, although it would tamish in use. A lolution to the tamiah
problem can be achieved bv ueing a eandwich-type of material with a high ailver alloy
for the outer layera and a low silver alloy ai Ihc core. Theae poialbilitles are dia-
cuiaed below, in the section MultiUyer Compoaitea.
The term "cupronicker' applies to a serias of aUoys of copper and nickel in which
copper ia the major element. Became of the Mint's familiarity with the 75 copper-25
nickel compoiillon, however, thii particular alloy haa been singled Out for special
attention. The chief advantaga in uaing the 75 copper-ZS nickel alloy for lubiidiary
coinage would be Ihat the Mints could make the conversion with Little or no diiruptlon in
alloy.
Among the objection* to tha alloy is that it is low in cost and would invite Illegal
duplication and slugging. However, the main difficulty is that a large proportion of the
coin-operated machines would require changeover to be able to accept both the preaent
The color of the 7S copper-ZS nickel alloy is plaaaing, though not ai white aa coin
silver. Copper-nickel alloys containing about 45 per cast nickel are much whiter than
■he T5-Z5 alloy. However, because of higher mailing and annealing tonperaluree, some
change in Mint procedures would be necessary. Thus, the chief advanUge to cupro-
nlckels would be logl, without a significant reduction In the disadvantages. Therefore,
it is judged that If a cupronickel is choaen it should be the 75 eopper-Z5 nickel alloy.
Copper -Nickel -Zinc Alloya [Nickel Silvers)
Because copper-nickel -zinc alloys can be made with only minor adjuatmenca in
Mint processing, the white alloys [typified by the 65 copper-IB nickal-17 sine composi-
tion) may be considered aa alternatives to Che cupronickel*. In general, the advantagea
and disadvantages are the same as for the 75 copper-Z5 nickel alloy. However, Che coal
hand, this cost advantage would be offset In pad by the need lor somewhat more corn-
nickel preference over the nickel silvers for subsidiary coinage. However, if the sub-
sidiary coinage is changed to cupronickel, the alloy for the five-cent coin might well
be changed to a coppar-nickel-iinc alloy so as to dlstlngaish between low- and high-
value coins. If the ditficulClea of Mint changeover are nol regarded as decisive, nickel
silver could be used for subsidiary coinage.
Columbium and Zirconium
The metallic elementa columbium and zirconium are worthy ol consideration be-
cause they have the advantage of being difficult (Chough not Impassible) to counterfeit,
and so high in price as lo virtually eliminate illegal duplication.
Du,iiz=db,Google
3(KJ COINAOE ACT OF 1905
jld require lOnie modification in die deaign or coining methoda in order to yield
iafactory coina. The aomewhat poorer coinability of circonium ii partially com-
laated (or by a good ore aopply picture, although metal -production capacity would
Proceaaingof columi
Adoption o[ columbiu
nickel, cDlumblum, or iirconium ahculd be compared. This comparison ahowi that the
incrcaaed cost ol adopting either columbium or zirconium would be in the order of
$100, 000, 000 annually, baied on a comiumption of 10, 000, DQD poundi per year. Tbi*
aeema to be a high price to pay for preventing counterfeiting or Ulsgal duplication.
Neither columbium nor zirconium have prestige value, in the senae that silver
price, attractive name, and application in the atomic energy industry - that lend thera-
aelvea to the creation of a desirable "public image*'. A vigorous public relations cam-
paign would be needed Co achieve thi» end.
In balance, however, the advantages seem overweighed by the disadvantages.
Multilayer Composites
The multilayer composites (also called "clad melats" or "sandwich metals") have
received attention as materials which can be used to produce a coin with almost the
silver. The uniqueneas of multilayer compositea would discourage both counterfeiting
and illegal duplication, while, at the same time, the cost of production would be
Processing, for a bme, would be outside of the Mints' capabilities. However,
believed thai Mint processes could be adapted to the manufacture of multilayer com-
posllea without serious diflicullies. The Mint could purchaae Blrip or re-roll bar
from outside suppliers until its own skills have been developed. While the characteria-
lamalnl lo be delermined. Furthermore, it would be necessary for the Mint to have
'■■■ured aouccas of supply until it developed its own capability to produce any multi-
layer that might be chosen aa a coinage material.
Digitized byGOOgIC
COINAGE ACT OF 1965
f low cost and good acnp value, in addltlao 10 the leneral advantftge* pre-
:ed for cupronickel. Scrap masi be IsJcen into account becauae nbaut 30 per
atrip remaina aa a ak«lftCon after Che coin blank* have been punched out.
1 the cupronickel -copper combination, since it conalsta only of copper and
Ltare of this combination ia that the expoe«d edge of the coin ie copper colored
ie advsnUge of being difficult to counterfeit or duplicate. On Ihe other haod,
ance would be distincUy different from traditional U. S. coini and might
e problema relative to public acceptance.
High Silver-Copper Alloy on Copyer
A eandwidh contiating of a eilvsr-eopper alloy on copper has Che ai
providing a coin close in oppekrsnee, except for the copper rim, to the p
it would have higher Intrinsic value than the cupronickel -copper compoaii
Sc,
■ap could b
,e r,cla>
imed
by uamg 1.
^tom
Th,
ie Ihst cc
s primary
inlinued us
disadva
>e in coi
nage
, aa point!
would be 1
idout
High Silv
■ Alloyi
on
=r-Copper
•ilver-copper alloy cladding.
a li objectionable, it can be elimi-
'e. Tot cnunple, a potslble com-
ide layers and 30 lilver-VO copper
cloBe in appearance to present coini. Though the
erable to the copper color.
lalp obstacle to adoption of such s combination.
Another means of obuining • "while -on -white" combination is by cl»i
ickel with, lay, an 80 silver-ZO copper alloy. The principal disadvantage
ination is thai the ecrap would have to be reclaimed by separation of the e.
athec than by remeltlng, becauae it would conaist of copper, nickel, «nd s
Du,iiz=db,Google
COmAQE ACT OF 1B«6
34
Furtharmoia, *.* Iha bigh-cooductivity *llvar-coppar alloy wore ait tba ii.cai, the
laaponae of Cha coin to tha eddy-curranl coin aelector* would Changs mtrkedly. Tbs
ravartc combination, eupronickel on » allver-copper klloy, would not be auacaptibla
il would not hava tba cloae raaamblaoca to tha praaant
' on eupronickel would have.
Thara aaem to ba aufficieni daficiendea In Ihia appioacb to drop It In favar o£ thi
otbar multilayara diacuaaed above.
Nickel and High-Nickel AUoya
Nickel h** anjoyad con«ldsr«ble ueage In other countTiaa aa coinage. It la coo-
aldered bare becauae of ita relatively good appearance, corroeion reeletance, and
colnablllty.
Became nickel la magnetic, however, almoet every type of coln-opaiatsd device
would have to be altered ii It were adapted (or coinage. For thia isaaon alone, it can-
not remain aa a alrong candidate for U. S. coinage.
Other material*, chough not praeenily acceptable, would require certain chai.gs*
to be made In moat machlnea, but not In all. Cupronickel haa been diacuaaed in tbla
light. Other auch poaalbUltiaa are nickel -baae alloya containing alloying agent* that
caiua tha magnatiam of nickel to diaappear. Nickel-5 ailicon, developed by the Iittai-
nationaJ Nickel Company, 1* an eiiample of luch an alloy.
The main advantage* advanced for theae type* of alloy* i* that Ihay are a* highly
regarded aa nickel, which ia accepted in many cQuctrle*. It cannot be argued, bawevsr,
that their high regard ig in any way comparable to the regard for allver. Compared to
the copronickele, they are Bomewhat brighter in appearance, but their coet i* higher
and the amenability !□ Mint proceBaing i* lower. Therefore, it ie judged that the high
nickel alloya ehould be dropped from further co n* id e ration.
Attention is alao called lo a nickel-5 lilicon alloy with a magnet material In the
center of the coine. This compoaite, discusaed in Appendix C, waa developed by the
tnternailoiial Nickel Company as a meana of operating tba preaent coin aaltetor* la
coin-operated devicea. The reasons for dropping thia composite from further conelder-
if the Chief Adva
other* for one or
Digitized byGOOgIC
COINAGE ACT OF 1»S6
• 50 aUver-SO copper allay
• KlaiDUini ti
• AccepUbli :
Main LimiUtlon*
■ liTnited by th« lupply of
lUvsr
• Much lowar Urniah ra-
• Practically no e£fee
proceaaai
a Good wear qualitic*
a Acceptable in praae
CO in -ope rated devi
a Difficult In counlerf
a Not acceptable in prei
coin-operated deWcei
• Potential for illegal
duplication
material until Mint
80 aUver-ZO ct
• Sams as BQ a
• Same ai i
limited I
aupply
Digitized byGOOgIC
comAQE ACT OF ives
1b term* of th« criteria for coliuiga, tha abova ^rrcy of the
material euggeata that weigbta muat be aeelgned to the Impiortanc
tradition of ailver in the coinage, effect on Mint proceaaea, and acceptability lo coin-
operated deuicei.
The imparlance of tradition muat be balanced agalnat the (liver aupply, «4lich will
determine how much total ailver can be uaed. The problem of changeover by the vend-
ing machine induttry, multilayer compoaitea, and Mint proceaaai ahould be conaidared
are dlacuaacd from the viewpoint of the over-all conaequencea of variciua changea.
(CI, competing with Induatry for what it
'cntually, the praaaurea of Important
pel the Government to abandon ailver
led legialatioD regarding the compoaltion
■ liver should not be Included in the
ution to the coinage problem, public
■ than total abandonment of ailver at
If the public could be aaaured that there would I
to come, there would be la«a likelihood that the preae
What muat the silver content of the coina be to a
Table I, a silver content of 15 per cent in all coins w^
the price of silver for a period of perhapa IQ to 15 ye>
stocks to lero by the yeara 1971-1977, depending on t
'reaau
ry a
tocka help prevent the
rreaau
ry.
itocka to be cffecilv
Id be ■
,olc
iw that there
ng in anticipation
year.'
liU
1 for the
t no pi
■ice
rise for a long timi
would be withdrawn
'^aTr
the']
'e\Ttc'^!u"'c,T.
rand'l
or"
:oina more readu'y.
chieve
thi.
lend? According t"
uldpe
; the atocka to main
r. dep
■endi
ing on the level of c
[ 30 pe
.age
demand. Psradoxi
cally.
Du,iiz=db,Google
COINAGE ACT OF 1906
demand were high, it is likely that high demand would be created by the incentive f
speculative hoarding. Thuq, the adoption of as much ag 30 pei cent silver in the c
ags Bystem might make it dltficult to keep the present coinage in circulation. Mar
over, Mint capacity would not he so high as to be able to cope with the ensuing shoi
11 thus seems that the upper limit of silver in the total coinage compoeition
should be 15 per cent. As indicated earlier, this over-all percentage can be achie
in choosing the 15 per cent silver level, because, as Table B-10 (Appendix B) shoK
high industrial demand could cause depletion of the Treasury stocks by 1971.
Du,iiz=db,Google
COINAGE ACT OF 1BS5
In the pravioui acction, it w>i indicated that th* total umual coniumptuiB of
■ilvei for coinage (hould bt llmltad to an amount that vrould ba aqutvalant to that con-
tumad if an alloy containiag 15 par cant allver were uaad in all lubaidiary co1d>.
Since an alloy containing IS pat cent allver it not advUabla, bacauaa of unattiactlva
color and low tarnlah reaiatance, other waya of achieving thla conaumptioD rate have
For anample, if only one coin were made of a (liver alloy, the alloy could be
quite high In ailver content and yet not exceed the aupply llmltatloDa. Since allver i(
being conaideced chiefly on the baaia of tradition and the preatlge It leada to the coloage
The alloy aelected for the half-dollar coin would depend on the nvimber of half
dollara minted. Thua, If 30 per cent of all aubaidiary colna ware half dolUra (on a face-
value baaia), the ailver content of the colna could be 50 per cent. If the half-dollar were
to make up only 18. T per cent of the face value of all aubaldiary coina minted, th* aUvac
content of the coin! could be aa high aa BO par cent.
Becauae the tamiah reaiatance of the SO ailver-50 copper alloy la low, the BO per
cant alloy would be preferred. Thla would neceaaltate fixing the number of haU-dolUra
coined each year. In the past, the percentage of half-dollara minted haa not been con-
atant from year to year. In 196Z, 1963, and 1964, about Z4, 31, and 36 per cent,
reapectively, of the value of aU aubsidiary coina waa in half dollaia. The median valu*
alnce 1950 waa 23 per cent. Therefore, production would have to be limited If a high
allver alloy were adapted for the half dollar.
Another poaaibllitv would be to apread the available amount of aUver evenly
through all the aubaldiary denomlnatlona . Thia could be done with a multilayer com-
poaile. For example. If the outer layera of the compoHlte contained 40 per cant allver,
and the core were eaaenlially copper, the over-all ailve
in could be uaed In aU
ilvei conaumptlon.
U Che outer layera of the compnaite conflated of a
cent ailver, the tamiah reaintance would again create a
and nickel. Though nut nearly ao good aa preient coin silver in thla reapect, the alloy
might poaalbly meet minimum iCandarda of acceptable appearance. Appendix C polnta
out that an alloy conalating of 40 lilver-SO copper-S nlckel-S zinc la uaed for coinage in
The CDiiiidEillion <if lUiijn fix Ihe Ultet doUu Li njulde the icnpe nf ihc pcaent iluily. Hmcvci, II li bcUcml dial, m*
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COINAGE ACT OF ig«d
Sweden, but that iti electrical resiitivity is too high to nuke it acceptable in eddy-
current coin aalectora. However, ii the core of the compoaite true copper, the cot
binatian would have an acceptable reiiativity x density product. Though the alloy
would not be aa eaaily procesaed to atrip (prior to cladding) aa ia the 90 ailver-10
copper alloy, ita proceaiing ahould not repreaent a great departure from preaent
practice. More detail* cegarding this multilayer compoBiIe are given in Appendix C
In the compariaon of materials from varioua pointa of view, it is seen that Che
cupronlckel alloy haa the advantage of being able Co fit into the preaent Mint operations
with a minimum of diiruption. A changeover to euproniekel could be handled quickly and
smoothly. On the other hand, to modify coin-operated device* to accept cupronickel
would probably require aeveral years to complete. Industry estimates have ranged from
The composite materials, on the other hand, would cause no disruption to the
industriea concerned with coin-operated devices. However, because the manufacture
of composite strip ia presently outaide of the Mints' capabilities, the strip would have
to be purchased.
The cost* of converalon of th* coin-operated device* and Increasad loans due to
slugging should be compared with the premium paid for multilayer compoaitaa. It ia
dlfftcuU to estimate the coat of conversion, becauae ihsre are three element* Involved,
The rir*t element i* the direct expenditure of fund* by the operators of the machlsaa to
replace or modify the mechanlams. Gstimatea of the cost have ranged from
of business resulting from the inability of the new coins to operate a vending machine
that has not been changed over. There have been no data obtained that can provide a
indicate slightly higher than 4 per cent profit on gross sales. Thus, a 5 per cent loss
of businsss per year during Che changeover would amount Co a loss of $8,000,000 in
profit annually. Even higher losses would be expected if the present coinage did not
probable increase in losses due to slugging as long aa the illver coins had to be
accepted. No estimate of this increase can be made at preae&C,
It i* eatimatad that the additional coat to the Mint of purchaaing the multilayer
strip would be between 40 and 70 cents per pound. In normal years, thia would amount
to about $5,000,000 per year. At current production rate it would amount to a* much
as $10,000,000.
In the over-all weighing of the coats, it should be noted that the changeover costs
would tie temporary, while the loaie* due to slugging and the costs of purchasing atrip
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310
COINAQE ACT OF 196S
'com the point of view of the Mint, on inunediBte chuigeover could be made, Ir
!, by returning to the manufacture of atrip for 1-ccnt and S-cent coin* (which i
rchaaed) and purchsiing material for the I0-, 25-, and SO-cent coina (which ii
n Adopting Multilaynr ComTiorttea
clad thickness
• ddy-eurrent type eelectora.
coining proceaa at the highes
amount of wear. Figure 3 111
era, and five-cent plecea now in eiiculation indi-
the coin before the core would ihow through, the
0. 0075 inch on the dime in either the cupronickel
remain and atill permit thg coin to function in th«
touily, the clad thiclineai Increaaa* during the
if the coin, which would be lubject to the greatait
■ thla fact. It Bhowa the croag aectton of an «xp«r-
:uproiiIckel on a copper core.
MAGNIFIED CROSS SECTION OF DIME (TOP) AND QUARTER (BOTTOM)
MADE FROM CUPRONICKEIy- COPPER- CUP RONICKEI^ MUl^TIlxAYER
COMPOSITE
e greateat amount of wear i
e will affect the e]
■hould be made li
ceptable limit a th:
lent change In the proport
Several methods are available lor industrl
have been eucceisful. The Mini* could be adapt
though time muet be allowed for the developmeni
y skiUa. Th)
■thods that
Rnthods,
iiQiloaiv*
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COINAOE ACT OF 1065
still to be eHtabliahed are the fna.nul>cturing to]ei*DCBa for tha eompoaita. '
production rung by the Minta ahould be made to reveal any diiflcultlea that might a
in Che production of the atrip/
The weight of the new dime made froTn either a cupronickel on copper combina-
ir the 40 p«r cent allver alloy on copper compoBitn would be between 2, lb and Z. Z3
ig, compared with 2, 50 grami for the weight of the preient dime. In order to
'e properly in all coin-operated devicel, the weight of the dime ahould be a mini-
of Z. Z gramg throughout itg lifetime. Apparently, therefore, aome dealgn
jee, auch as a thickened border, would be neceaaary in the dime in order to
^aae ita total weight, A thickened edge would alao be beneficial in that tha amount
•At (in terma of thickneaa reduction) would be reduced.
of the acrap from the ailver alloy on copper compoalte would ba 16. SZ p
78. 55 per cent copper, 2. 65 per cent zinc, B.nd 2. 07 per cent nickel. The outer layera
alone would contain 20. 65 per cent copper. Cslculaliona baaed on the copper diatribu-
tion In the outer layer and in the cote ahow that up to 26 per cent acrap could be
remelted to make all the alloy needed for the outaide layer*. Any excegg gcrap would
have CO be refined, rather than remelted.
While thig will legult in a conaiderable amount of additional handling, the in-
creaaed coat would not be great. Recovery of the. metal, valued at alightly more than
S3 per pound, ahould not be difficult for thig compogition. The caata of procegaing to
gcrap could be remelted or not.
The acrap problem with the cupronickel- copper combination la minimal. If the
scrap could be ujed to prepare the material for the outer layera of cbm compoaile. The
excegg could algo be uaed for making the cupronickel allu^ for the five-cent coin.
a copper-cored compoeite would be noticeably
icuaeed earlier, the dialinctlve red-appearing
and illegal dupllcataa could be eagily recog-
rlher enhanced, according to a auggeatlon
:opper edge with a apecial deaign during the
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312 COINAOE ACT OP I»6fi
!■ Other hand, departura from the praaant appearanca might ba eonildirad ■
idvantage. Morcovar, axpoiing tfaa functional ftature* of tha cols might
xpandva mateclali capable of acceptanca In praaant-
Both tha advantage! and dlaadvantagea muat be conaldared. While tha advaotagai
may balance the dlaadvantagea. It might be pxaferable to avoid tha problem altogether
by devising a mcani of obtaining an all white edge. Accordingly, tha Mint ahould give
con aide ration to the poaalbllily of redeaigning ica upaatting toola to shape the outer
adge of the blank in auch a way that Ihe coining operation covera the core material with
the outaide layera. Figure 4 ihowa the auggeated procedure. Other waya ara no doubt
poaalbl* and ahould be atudiad.
POSSIBLE ECONOMIC CONSEQUENCES OF A CHANGE
IN COINAGE tilATERIAL
The principal problem to tie faced la tha poaalbility that the preaant coinaga might
be withdrawn by the public. In order 10 aliminate the economic incentive for the public'!
withdrawing the present ailver coina, the Treaiury alocka can ba uaed to raaiataln tha
price of ailver below the point at which withdrawal and meltdown would be atfonomic.
At a minimum thii will be neceisary throughout the period of traniitlon whila large
Withdrawal of the present ailver coinage for sentimental reaaona i* much more
for not calling in the preaent coinage, i
created, publicity releases could give
(1) The present coinage will not be withdrawn by the Government.
(2) The silver price will not be permitted to rise for a considerable time.
(3) A change of the coinage alloy will in no way affect the purchaalDg
|4) The silver supply and demand situation haa been reconciled and no
crisis will occur.
Conversely, legiaUtlon prohibiting melt down of ailver coina and prohibiting
export of Silver would create a climate auggeatlng that a problem exist*. The conse-
quences of such a climate would be to encourage hoarding of coins for both sentimental
and speculative reasons.
Since the above suggestions are outside the scope of the preaent atudy, thay are
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COINAQE ACI OF 1065
313
Uting Present Method o
MuEtiloyar Compmlte
Modrflad Method on
Mulllloyar Compoiite
Sheered Blonk
A SDOCESTED UXAN5 FOB OBTAININO A WHITE EDGE ON A
MULTILAYER COUPOSTTE COIN CONTAINIHG A COPPER
CORS
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COINAGB ACT OF IBSS
CONCLUSIONS AND RECOMMENDAT IONS
Iteria (or U. S. coinage mUeriBls, Battelle
iting oi cupromckel (or, conceivably, nickel
fnrt on the new coins. Ther
Htepg are required in order
bilily of making large aniouon of coins of •atiitac
2. In the eveni thai some unforeseen problem ahouid disquaUfy the cupronickel
compoBite material for uce by the Mint, it ia recommended that the new coins be made
■coeplBble, alloy would be the 65 copper- 18 nickel- 17 sine nickel silver. In any event,
the Mint may wish to consider Ihe eventufti use ol a homogeneous base alloy after a
multilayer composite has provided the tin:ie needed for gradual adaptation of vending
machines to accept both old and new coins.
3. The retention of some silver in the coinage is deairabte on the basit.of
tradition and prestige if this can be accomplished without compromising the achieve-
atlon suggested that no more than IS per cent of projected subsidiary coinage require-
that even at this reduced rate of use, silver might have to be removed from our coinage
altogether within 10 ta )S years. However, within these limitations, it may b* adjudged
desirable to continue some silver in the coinage. In such an event, and ignoring the
special case of the silver dollar, there would appear to be two general options!
(a) Use the 15 per cent, or bo, oI silver in the 50-cent piece. In the interest of
clad on a lower content silver* coppe r core.
(b) Spread the 15 p
tent silver-copper core.
Legislation establiahing either of these materials could include speciflcal
material containing no silver. A cupronickel (7 5- i5)- copper (silver bearing) ,
posite shown above could be authorimed ss a replacement lor the silver alloy ci
posite when the silver stocks dropped to any level decided upon, or at any give
It is suggested that the dale for the second changeover be set at July 1, 1975, j
earlier changeover be permitted if the Treasury's silver slock ehould drop bol
Digitized byGOOgIC
COINAGE ACT OF 1«65 315
a Utar date. It would atct
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316 COINAQE ACT OF 190S
APPENDIX A
D STATES COINAGE
Columbium
Copper . ,
Molybdenuin .
Nickel , , .
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COINAGE ACT OP 1965 317
APPENDIX A
OUTLOOK FOR SELECTED METALS
CONSIDERED ALTERNATIVES TO SILVER IN UNITED STATES COINAGE
Columbium
Copper
Maoganeia
Zircon
Titanium
ToBgateB
Zinc
ium
The supply relationihip* preaented In this analyaia are baaed foi
in data publiahed by the Bureau of MInea. Of particular value la thi
jlicalion Bulletin 586*.
r the most part
! Buraau of Mines
Theae daU on availability are auinini
» on ailver availabUity are alio ahown f
ity repretenta reacrvea of metali in the
:a«ur<d, indicated, or reaaonably inferr
laent economies. In contra. t, resource
iriied for the above metals
I are considered >• the mel
if (Ufficlent grade to repres
in Table A- 1. The
itancea, avalta-
ital contsnt of
,ble in terms of
:a1 content of
luced through other scarcity.
•nt potential
higher prices
i through the end of the year ZOOO are al
I baaed partly upon projections by Lands
so Bummariaed in Table A-
■berg, etal.", in Resource.
> through 1980
■ in America's
nand.
For the United Sutes, scarcity of a metat resource might result either through
a of foreign sources of raw-matsrial aupply upon which this country is dependent^ or
ough Che world industrial denkAnd for tha commodity exceeding production capacity
1/or resource limit*. In cither case, scarcity i* accompanied by rising price level*
ich for a coinage metal could result in the melting or hoarding of currency for its
tal content. Thia is the situation this country now faces in the use of silver as a
nage metal.
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318 COINAGE ACT OF 1965
meUl mu.l re.t upon definite economic criteria, Fir.t, Free World
■ ervcB and potential reaources of the metal ehould be sufficient to meet
World demand*, preferably through the year ZOOO, whether or not the
ei or potential reiourcee must be anured under prolonged emergency
:ity, per ge. Alao, industrial users of the metal should have the
ichnological alternative of turning to more plentiful substitutes in the
r coinage and industrial uaes.
The outlook for aluminum metal, both from the viewpoint of demand and supply,
smand have been accompanied by successful exploration efforts for bauxite, the
erred ore of aluminum. The expectation for continued discovery of high-grade
id for aluminum metal in Che United States flirough
per annum through 1980 and a rate of 4. 3 per cent
match those of the United SUtes, cumulative Free World consumption of aluminum
metal would equal 500 million Cons by the year ZOQO. This medium projection would
utilize only two-thirds of Ihe indicated Free World reserves of the metal. On the other
hand, if consumption of aluminum in other non-Communist countries eventuaUy eiceedi
consumption in other countries, Chen total Free World cumulative consumption would
because exploration could at least double present reserves of aluminum ore in the next
four decades.
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COINAGE ACT OF 1966 319
in the United Stales ii derived from Jimaica and from Surinam ore. Ai ihown in
Table A-1, Uieie reaerves of aluminum metal contained in bauxite, plus our own
to supplement these reserves are most tilcely to be made in Australia and in Africa.
It is only in the relatively well-mapped nontrdpical xreas, such as the United States,
aluminum as candidate metal for U. S. coinage. Compared with total consumption,
coinage requiremenla of even BOOO toti« would have negligible e£!ect upon supply-demand
relationships. The excess Government metal stockpile is also more than adequate for
resources could supply this country's requirement, for Ihe meUI, with little likelihood
World production of chromium ore has doubted on the average- of every 10 years
in recent decades as a result of fast-growing metallurgical refractory uses. However,
nothing in the foreseeable future is likely to change this country's total reliance upon
overseas sources lor its needs.
Available reserves of chromium conuined in chromile ores in the United Sutes,
shown in Table A-1 , are in Ihe order of I. 7 million tons. These reserves are low in
Cr203 content, are difficult and costly to concentrate, and are therefore undesirable
Western Hemisphere.
Projection of demand for chromium in the United States (shown in Table A-1) are
tied to projections of steel demand, especially the specialty steels. As shown, the
medium cumulative demand in all us-ea is estimated at 30 million ton* of chromium by
the year 2000. Added to this is an estimated 110 million tons of other Free World con-
sumption, which results in an average total Free World cumulative demand of about
140 million tons of chromium in the 40-year period.
States would be faced with serious transportation problems during wartime. Emergency
only through stockpiling.
more than 20 per cent of the alloy. Kence, stockpiling to permit uninterrupted use
during emergencies would be within the range of feasibility. However, emergency
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COINAGE ACT OF 1965
Columbium
Tht first commercial ul* (or coliimbl
lerroklloy uied in making illDyin^ addititiTia
uacd iD the metMl form in nuclear reactori.
high-lemperaturr alloy, for aircraft and miMalliH.
For many year*, ciaentiallY all the calumbium uied u> the UnlUd SUtel ma de-
rived from Af[ici.n concentrate* of Che mineril columbite. During the Korean War,
pyrochlore, were diacovered. Thrae are located mainly in Braail, Africa, and Cuiada.
In 19SS the known Free World rcaource* of colunibium maUl were estimated by
the Bureau of Mine* to be about 10 million toni*. Tbeae resources were predominaatlr
located in South America (T. 9 million tons}, most of which was in a single deposit in
Brazil. North America accounted for 1 million ton* of columbium, of which 250. OOO
tons wan in the United Slalea and 'he rest in Canada.
The largest use of columbium haa been in lerrocoliunbium. which ii Deed as an
for columbium metal, either in high-temperature aUoy* or nuclear application!.
There was no domestic mine production of columbium concentrate In 1962, al-
ium were consumed in the United States in 1962.
hat present mine and mill ore -concentrate
antained columbium metal in Canada and 2, SOO
tons in South America. It ia estimated thai within 2 years Free World mining capacity
:ould be expanded to produce additional ore containing 5, 000 tons of the meUl annually
x meet demand* for coinage if thi* metal were choaen for such service. Interim d«-
-nand could be met from Government stockpile* of raw material*, which contain an
!*timated 5,000 tons of columbium metal.
Present extraction capacity in the U. S. ia thought to be about 1,400 tons annually,
■ emus of industry is that capacity for the reduction of 5, 000 tons of columbium per
idequate for any projected demands for the metal. However, annealing of columbloixi
requires special high- temperature vacuum furnaces. Presently, the toUl U. S. capacity
[or this type of annealing is only 500-750 ton* per year. Sufficient tmnealitig capacity
;ould be made available in 1-1/Z years.
Columbium is quoted at about (50 a pound, although going market prices are
iiilrKd Cli,05 (ronulnlng 19
though
64 1.
ras
1 of CO
lur
nbi
umn
Ol this
capaci
., IJ5
trj
r cent
■ repr.
ted at
ab
o""
700
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COINAGE ACT OF 19««
A- 5
It ii axpected dut Ihe pries of columblum will dacreaac In (bm futura •■ volum*
production increaaea. Induatry repraaentativaa contacted ballava tbat, with a market
I 5, 000 ton* or mora of flia mstal, tht price of ahcot or atrip product would ultimately
' in the range of S12-$13 per pound, Tlic value of r*v«rl icrap, it la eatimated,
luld probably range from $1 to (3 per pound.
Future demand for columbium dependa partly upon the outcome ol technological
iment which might entend ita application. Therefore, any projection of future demand
diia atage would be subject to a high degree of uncertainty. All tiiat can be aaid ii
at coniiderably more columbium is available in known reiourcea than will be required
Foreign suppliea of columbium ara vulnerable to political and emergency un-
ainty. In view of thia riak, one muat give apecial emphaaia to the North Americae
The United Statea haa long been the largeat copper" producing and conaumlng
Ltry In the World. However, aince World War II thia production baa been inauf-
ea baied upon Bureau of Mines Btatiatica puUlahed in the 1960
■At and Problema place United SUtea reaervea of copper at 32. 5
erg, et B.1, , luggejt that U. S, reaervea of copper, taking Into
.a1 ores not included in the Bureau of Mlnea eatimate, may be on
Tiillion Ions. A further reliable reaerve ii to be found in the
:ona of recoverable copper- in-liae in the United Statea.
of new copper include about 66 million tone in the Weatem
le along accounting for 46 million tone. Total Free World re-
e United Statea are eatinuited to be 153 million tana of copper.
ion tona of Inferred ore ia alio Aougbt to exiat in Chile and in
Medium projectlona of cumulative copper consumption in the
1960-17S0 period are ealimated by Landiberg to be 42 million tone
tons for the 1960-ZOOO period. To this should he added foreign den
jf a grade higher tl
«n that mined in the
today. Additionally, new discove
.riea, or tfie aubati
tutlon of aluminum to
1 make up the deficit. The figurei
I do indicate, how*
ver, thai the United
sly increasingly upon foreign sour
cea to meet projec
ted dome a tic demand ■
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COINAGE ACT OF 1BS«
A-6
Aa an allov lubititut* for ailvcr in Unitrd SUtca eoltugc, it ■sema unlikely that
the metal value ol copper would ever eiiceed the moDetiry value, at leaat in colna of
larger denomination, (Table A-Z, at the end of Ihia Appendix, ahowa the price of copper
relative to (ilver. ) Then, too, the amount of copper required for coinage 1* quite in-
aigniflcant in relation to overall copper demand. However, war-induced scarcity wonld
poaaibly require that an adequate atockpile oE copper be maintained for Golnafe purpoaes.
Although mangan
of the ore in the U. S. ate limited. Because of this. Ih* United
States ia faced with Ihi
i problem of finding an economical means of utiliiing large low-
grade reaourcea for e.
nergency purpose!.
In the 1960 editi.
manganese ore are in the order of 1 billion tons. Two-thirda of
thi. ia in the Communi
at eountriea with the remainder in India, Braail, Union ol South
Africa, and Gabon.
A .ummary of in
depoaita ia .hown in T
.n tons, with leas than 1 million lona available domeatlcaUy. The
manganese content of 1
ow-grade manganese reaourcea available in thia country, how-
ever, ia eatimated to 1
le on the order of 77 million tool.
The projectiona
cumulative demand for
contained manganese in manganeae orea through the year 2D0D ia
T3 million tons. Aasu
ming that steel production Increaaea at a rate of 5 per cent
anoually in other Free
be required in the four
aupply could likely be
accommodated by .lightly lower grade resources and improved
IS. Ocean-floor deposits and new diacovery possibilities also
offer promise of reiie'
zing the long-term aupply situation.
From the foregoing it is evident that high-grade manganeae ores for production of
metal for coinage are strategically in ihort supply in the United States. Stockpiling of
emergency-induced shorUgea of the meUl. However, low-grade reiource* could
likely alleviate any prolonged ahortage of the metal for defeaae a> well as coinage needs.
Molybdenum
exploration baa greatly improved the aupply outlook for the metal lately.
Digitized byGOOgIC
COINAGE ACT OF 1985
Most of (be wDTld'a aupply ol molybdsnum ia r*Bl[icled to the Wcatern Hemiapherc
Tbia combined reierve ia cooaidered to be in excel* of 2 million tona, of which over
half ia in the aingle Cliniax Molybdemun deposit in Colorulo. Moat of the renuining
ChUe.
Projection! of demand for molybdenum, ahown in Tikble A-1, are related to riainB
oeodl. Allowing for both domeitic conaumption
ree World ia dependent, medium cumulative
a of molybdenum by the year 2000.
problem could develop in the latter part of the century. Adequacy, therefore, »rtU
from copper ores might hIid alleviate the long-term supply aituation.
Molybdenum ranks high on the Hat of candidate metula for coinage in terms of
aconomic potential. Because the Weitern Hemiaphere is weU endowed with the metal,
source* of the metal would be available during emergency period*. However, with
one-third of future supply expected to be obtained la a by-product of copper mining,
major fluctuations m copper production could create aapply problema. Alio, coinage
would constitute one of (he single largest markets for a metal such as molybdenum.
It is likely that production could not easily accommodate thi* added demand, especially
during peak period* of economic activity.
enough nickel to meet requirements seems satisfactory. With the enception of Cuba,
the world's largest known reserve* of nickel are located in Canada in the provinces of
Ontario and Manitoba. Of the 6 million ton* of Canadian nickel reserves shown in
Table A-1, the International Nickel Company controls * million tons. Other importani
Free World reserves are in New Caledonia, the Philippines, and in Puerto Rico.
Reserves in the United States, located in Oregon and Alaska, ace estimated to
contain about 500, OOD tons of nickel. These deposits, however, have supplied only abi
15 per cent of United States requirements in recent years, almost entirely for defense
stockpile*. It is considered unlikely that economic incentives would add measurably U
these United SUIes reserves.
United Sutes nickel consumption, irtiich was 124 thauaand tons in 1963, is
These requirements are three times the present known reservaa listed in Table
but are about equal to resources plus reserves. It is likely, tiiercfore, that a
sition to lower grade ores in tbe future will be necessary. DevalopOMBt of the
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324 COINAGE ACT OF IVflft
Then is, of course, the •xpecUtion of addlUoiul dlicovsriei of ntckal (uUldc orsa in
Cvutda of the Sudbury type *■ wall ka the asteDiion of r<«*rv«« of known depo«ita in
Cuads. The outlook for nickel aufftclency la therefore >l le>«t aa |Ood or better than
for moat of the other caadidat* coinage metal*.
The titanium metal- producing Induatry wsa initiated In the early IfSO'a in reaponae
to GoveTunent itimulatioii to meet military Dead*, llieae follonred a period of rapid
growth in which world production of titanium aponge meUl reached 17,000 tone by I95T.
Subaequantly, with aa abrupt change in defenie effort away from use of titanium metal
in maimed aircraft, production (lumped to leii than one-fourth of production capacity.
In the 196Q'*, new una for titanium la aircraft and miialle* began to develop,
and applicatlona in new fields were establiahad through research and development.
Accordingly, world production of titanium sponge had risen to a level of nearly 10,000
tons ia 1^63 in response to a market that ahowa promise of continued growth.
The mineral generally used for making titamum iponge la rutile, although
ilmanitc and altered ilmanite might be conaldered auitable under coDditlona of scarcity.
Rutile is the preferred ore for aponge production because of its high titanium content
{•)i per cent TiO,), its lack of iron, and the fact that It tends itself to direct chlorlna-
lon of production is limited at praaent. The
lis to aupplcment domeatic production of rutile.
■enture for the recovery of rutile ia that of Sherbto Minerals Ltd. , located
ne. Early estimates suggest that these reserves are on the order of 10
)f high-grade rutile, a figure which exceed* all other comparable reeerva*
This depoiit alone ia capable of supplying the world's demand for
il ores for an indefinite period*.
m metal production capacity tn the United Statea 1* thought capable of
In the<
Bvent of loi
IB of foreign
1 of rutile, domestic suppliers of ttie metal
juld be for.
ced to turn
to ilmenite o
.t high-
ce exhaust.
ed. The inco
ce of using these resource* might reault In
creaaed m.
Btal costa.
However, d
omestit
: reaourcea are adequate for foreaeeable
db,Google
COINAGE ACT OF 19S5 325
Having the high,
highest melting poin
.1 o£ .U
du.tri.l .pplic.tton.
where
{ether with inereiiin
lougb domcalic resei
rves of
»diqu.cv i. in lORU
■ doubt.
ource. d tung .ten ir
1 the Ud
about 71,000 toni ol
: tungaM
ilof the.edomeitie i
reicrvc
IB are estimated by the Bureau of
Except where lecovared a* a
by-producl, mo»l o! Iheae domeitie teicrvca are lubmarginal.
Total Free World reserves of tungsten are estimated to contain about 320,000 tons
of tungsten metal. Although these reserves are widespread, the United States is
probably belter endowed Chan soy other Free World country. In comparison, reserves
of tungsten in China, North Korea, and the U.S. S. R. may be three to four times as
great as the combined Free World reserve.
Projections of cumulative demand for tungsten by Landsberg, et al. , shown in
Table A-1, are based upon unchanged relative use of tungsten per ton of steel produced
and constant use in relation to industrial machinery output. The medium projection of
U. 5. demand through the year ZOOO exceed* Free World reserves by about 35 par cent.
Assuming that Free World demand rises at the same rale as that of the United SUtes,
cumulative demand for the non-Communist countries, inclusive of the United States,
might total 1 million tons, equal to about three tinws regerves.
This projected scarcity of tungsten may ha alleviated somewhat by new discoveries
especially in less- thoroughly- explored areaa than the United States. Improvements In
tecbnolegy may also permit exploitation of lower grade deposit*, the enlension of known
points out, discoveries of large deposiU of tungsten, or substitution of other metals for
tungsten, will be necessary by I9B0 if cost increases and reduced use of tungsten are
to be avoided.
The outlook under emergency conditions is less encouraging. Because it is es-
Btrategic mineral for stockpiling under Public Laws 520 and 774.
chase program, 1951-1956, 4 years were required before peak production was attained.
Also, melall that might substitute for tungsten in an emergency, such as molybdenum,
might also be in light supply. It is apparent, therefore, that in an extended period of
emergency, use of the metal for coinage might contribute to a shortage of tungsten tor
strategic and more critical needs. Small amounts used for alloying might be permla-
Du,iiz=db,Google
326 COINAGE ACT OF 1066
A' 10
Zinc
Since World Wtir U, the United S'Ue* bat telle') 'i:>i>n foreign aourcei of eIdc to
supplement domeilic produi^'ioa to meet vKpanding iaduetriel and militery demftnde, t
■ i-end that ha.a been accentuated by the drctine in domeitlc mine production of (hi: metal.
Zinc 18 widespread in occurrence, with important Free World production coming
from the United Statei, Canada, Mexico, Argentina, Peru, FiBland, Weat Germany,
Italy, Spain, Sweden, Japan, Ivlorocco, the Congo, Rhode.ia, «nd Australia. ToUl
ted ore in theie and other Free World countries 1*
figure for tine.
Cumulative projections of demand by Landsberg, shown in Table A-l, indicate
that United States requirements for line in the four decades, 1460-2000, of 69 million
tone alone equals or exceeds total Free World reserves of recoverable cine in mea-
sured, indicated, and inferred Qrei. When other Free World needs for sine are taken
into account (which are at least 50 million tons in the next 40 years at present levels ol
consumption), Che data suggest that a serious deficiency in zinc wilt result.
The seriousness of this supply-demand situation is mitigated somewhat by the
probability that the inferred reserve estimates are on the low aide. Improved recovery
techniques might also relieve the supply situation somewlut. Nevertheless, the outlook
for sufficiency of zinc to meet world demands through the year ZDOO is in doubt.
From the standpoint of self-sufficiency for monetary needs in periods of emer-
the meUl. It should also be noted that the U. S. Covernment has eliminated cine from
its stockpile objectives. As a result, the stockpile has an excess of 1.5 million tons In
The source of this metal is the mineral zircon. Most of «
in which zircon is a minor constituent. Over one-half of U. S. i
with Florida ilmenile reserves and production.
As shown in Table A-l, reserves of lirconium in zircon,
and in the Free World, are quite large. The Bureau of Mines et
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Ove
T oni
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3f the 50,
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to
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.. In rc<
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lirconiiu
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1 >hc
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hia me
tal be ae
lecM
id
COINAGE ACT OF 1966 327
e lirconiujn mvtat produced ig for use in cladding of.
.Ithough ■ amsll quantity finda application in ferroaa
l*ra, total demand for the metal has been leii than
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COINAQE ACT OF IBflfi
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COINAOE ACT OF 1966
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330 COINAOB ACT OF I96ft
APPENDIX B
SILVER SUPPLY AND DEMAND
CONTENTS
r Requir«i
:ca of SilvB
■dbyGOOgIC
COINAGE ACT OF 1965
APPENDIX B
SILVER SUPPLY AND Dl
EMAND
yean
1. Dui
led and
sought for (ome 5 oi
r b thousand
ring thi.
the arti
1 uid ■■ ■ m>diim> ol
exchange.
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mea, the
le in ind
u.tiy, ud il Lpp»T
J play
aninc
reaaingly
c« »g. >
nd in nsttoDul d<fen.
e in the yea
rs ab(
ad.
, world
-on.umptlon of >ilve
r has excet
dedp.
■oducti
on, the
hock.. Moit recnlly, the deple
adu •trial OB «d» »eco
m-^anied by
coinage
cd Slitdi
,upled with i
:ic production
srve., h
a* precipitated an in
supply
1 demands
About two-thirds ol the silver consumed in the Free World has been for induat
uses (arts and indmiry). The rest is utiliied in coinage. As shown below, conauni
by the arts and industry in the 1 963 calendar year waa nearly balanced by productioi
However, use of silver in coinage contributed to a Free World deficit of about 210 n
419. Z
uoa. 7)
Silver Requirements
Silver is one of the noble metals, a designation technically referring only to ita
superior corrosion resistance. However, silver has other qualities that make it deatr-
able and useful both in industry and in coinage, namely, high nisUeabillty and ductility
and attractive color and finish. Its properties of high thermal and electrical conduc-
tivity account for much of the growing industrial demand (or the metal, while the largest
industrial demand has long been in photogrsphy. where silver compounds are used be-
s of silver and its compounds and the s
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COINAQB ACT OF 1005
Silver ore
By-product
and line m
lead
ning
U. S, Treasury
i
1 1
v«r coBc*ntr«l
^^
t
t
Bullion backing
Uncirculated
RcpToccated
(Se
Note) 1
>»d m.liLl.
(See
Note)
Coining
^_^„_— —
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by the
j~ "
^^
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1
1
Federal Reserve System
I
1
Photogcaphy
Sterling flilwire
Chemicul reagcnci
and h<.Uo«.ce
Note: Silver for coinlni oi tndiu-
Silvering of mirror.
Electrical contac
trlal conaumptloB 1* obtained by
CatalyXs
C.r^ic.
Bearings and bug
Rocket motor no
hinga
r,l«ii
■ilver from the slock of bullion
Dental fillingi
tha
backs
e certlfic
.
Digitized byGOOgIC
COmAOE ACT OF lOflS
nivailabla. However, naaoiuble ealiniBtea baaed upon i»r-
d in Table B-1.
ludual
rial Appli
Photogr
aphic pro.
Soldera
and braii
Electrk
:al contaci
23. 0l»l
la.oC)
Silver tyanide for plating 2. 2. ot'"*
Starlingware and other 25.4 22. ? ">>
The Bureau of Mjnai aatimatea that inhiitrial conaamptloB of allver in the U. S.
in 1963 was 110 million ouncsa, unchUfcd from the ptevioua year.* New allvcr lued
did silver uaetl in brasiiig alloya for metal joining. A moderate decline in the uac of
(ilver in gterling ailverwara wa* regiitered, bowevar. Increaaed efforta to develop
new aubstitutaa and to uaa illvcr mor* economically in many spplicMlona has contrib-
uted, at leait temporarily, to the levelini off of Induatrial ailver demanda in thia
Iver include dental alloya, glaaa coatlngi for
r de-aalting Vila, and ailver-plated bearings.
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334
COINAGE ACT OF IftSS
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ESTIMATED QUANTITY OF SILVER USED IN INDUSTRY A
ARTS IN THE UNITED STATES AND IN THE FREE WOBLI
DURING THE CALENDAR YEARS 19S0-19M
■dbyGOOgIC
COINAGE ACT OF 1B0S
D QUANTITY OF SILVER USED IN INDUSTRY
AND THE ARTS IN THE UNITED STATES AND IN THE
FREE WORLD DURING THE CALENDAR YEARS
1960
102.0
19il
10S.5
196:
110.4
1963
110.0
1964
123.0
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COINAQE ACT OP 1960
■ (hown, lotAl Free World aic of ailvar In Induatry uid Id the «rt* h» riieu from
Dout ISO million ouncei in 1950 to 2«0 million ounce* in 1963, u averkge rats of mht
:counled lor by countriaa other thin the U. 5. In contraat, conaumption of induatrla
Expectaliona are that Induatrial demand for ailvar in th« Tree World will canIlDU«
to inercaae in the future deapite the recenc price riae in the metal to $1. Z9Z9 (ui ounce)
from SO. 929 in 19bl. Daaplte the fact that the uae of nonallver light-ianallive materi«](
ailver chemicala in ^otography la not threatened. Space-age applicationa and new de-
velopnenta offer aignificant potential for Increaaed uae of ailver which ahould offaet
declinea attributable to aubatitution or to reduced retail aalea.* Therefore, a Z percent
minimum annual Increue in future Free World ailver conaumption la conaidered raa-
Uie of Silver lor Monetary Purpoael
Since paaiage of the Gold Rraerva Act Id 1900, ailvar haa played a aecondary,
though important, role in out monetary •yalem. The metal hi>a been uaed in aubaidlary
colDf (dimea, quartera, and half-dollara) and in ailver dollara, and aervei ai backing
for lame 1.2 billion dollara worth of ailver certilicatei in circulatian. Altogether,
however, illver »ccounti tor leia than 3 per cent of the U, S. atocli ot money. "
Figure B-3 and Table B-3 ahow the conaumption of ailver for coinage in th«
United Slalei and in the Free World for the period 19Sa through 1963. The data ahow
that in 1963 the United Statea accounted lor 65 per cent of totil Free World coln^a aa
coinage in the reat of Ih* Free World haa declined ilnce 1961, although the trend until
1961 wal upward. *** In conlraat, ailver minted in United Statea coinage in 1963 in-
creaaed 34 million ouncei from 196Z, a gain ol 45 per bent. A further gkln of 90 mlUloa
The trend toward demonetliation of aUver in other Free World countrica la con-
tinuing. **** For eattmation purpoaea It ia aaaumed that the amount of (liver u«*d tor
coinage in the rest of the Free World will decline to about 30 or 40 million ounce* by
1970 from the present level of 60 million ounce*.
Proiectiona by the U. S. Treaiury indicate that. If the preaent icarcity of coin*
peraiati, the amount of illver required for United State* coinage in calendar year 1965
will be about Z90 million ounce*,****' up from ZOl million ouncea in 1964, Should
fllm lad orfni UgliEi i>
CDjipsi •[[oy. [nlhrlongnii
Digitized byGOOgIC
COINAOE ACT OF t»eS
coinnge demand continue to increaae in thie country, the United State* Mlnle, working
at capacity, might continue production at Ihe 196S Uvel into 1U7, when production
could be increaaed further aa the new Philadelphin Mint begina operation. The rate of
increase in coinage demand is ippronimalely the aame for both lilver- containing and
non-eilver-containing coins (aee Figure B-4 and Table B-4), Thia auggeita that much
fi«d by above-normal inlereit by apeculator. and coin coUeetora, It ia poaaible,
therefore, that ehort-run coinage demand could follow a cyclical pattern aa it ha* hi«-
torically. Thus, it ia poaeible that a down-turn in demand for lubaidiary coin* could
Source* of SUver
World production of ailver in 1960 wai edimaled a* Z49. 5 mlUion troy ouncea.
Of this, some 39 million ounce* waa produced in Communiat counttiea. Of the remain
ing 210 million ouncea, which repreaent Free World production, 53 per cent wa* minei
in North America, 22 per cent in South America, 8 per cent in Europe, 3 per cent in
Africa, 9 per cent in Oceania, and about 5 per cent in Aaia.
Mexico, which ha> long been the leading producer of ailver, accounted for
4Z. 8 million ouncea of eilver in 1963. The eecond largeat producer waa Peru with
36.4 million ouBcea. The United Slate* wa* third with 35. million ouncea, followed
by Canada with 30. T million ounces of newly mined ailver.
The silver mined in the Free World i* commonly produced a* a by-product or
co-product of copper, lead, and tine. Two-thirda of the dcxneatic alLver mined is
recovered aa a by-product of theae orea. Virtually all of the remainder cornea from
mining.
Figure B-5 and Table B- 5 .bow the
and in the Free World aince 1950. Aa *h
haa declined in the 14-year period at an a
COntra.l, total Free World ailver producl
from 170 million ounce, in 1950 to 210 m
average rate of increase of I. 5 per cent each year.
Beeauae moat of the ailver produced in the Free World ia derived from baae-metal
Silver producera eat
be produced by 1968. For
World production of ailver will inctcaie 48 milliea ounce*
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COINAOE ACT OF 1968
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COINAGE ACT OF 196S
TABLE B-3. QUANTITY OF SILVER USED IN COINAGE IN THE
UNITED STATES AND FREE WORLD COUNTRIES
DURING THE CALENDAR YEAHS 1950-1964
■dbyGOOgIC
340
COINAQE ACT OP 19«S
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FIGURE B-*. ANNUAL COINAGE OF CENTS, NICKELS, DIMES, QUARTERS, AND
HALVXS IN THE UNITED STATES FOR THE CALENDAR YCARS
1950-I9M
Digitized byGOOgIC
COINAGE ACT OF 196S
, ANNUAL COINAGE OF CENTS, NICKELS, DIMES, QUARTERS,
AND HALVES IN THE UNITED STATES, FOR THE
CALENDAR YEARS 1950-19M
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342
COINAGE ACT OF 1905
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COINAGE ACT OF 1965
343
TABLE B-5. PRIMARY SILVER PRODUCED IN THE UNITED STATES
AND IN THE FREE WORLD DURING THE
CALENDAR YEARS 1950-1963
Year
U.
S. P
oductt™ Tit.
Fr„ World
1950
173.0
167.7
182.3
187,7
178.0
189.0
191.2
195.4
202.1
186.8
204.5
199.9
202.4
196*
210.0
215
258 million ounce!, from 210 milUon ounces in 1963. Beyond 1968 it i> aaiumed thi
production increaaes will gradually aisume pait ratea of change, with Free World p
duction rialBg to 2S6 million ouncea of ailver by 1975.
The Bureau o
1 that in 1944 total world illver raiervea were abo
it (about 170,000 tona). Of thia, about 763 million'
r in the United Statea (about 26,000 tODi). Since
litsd Statea elimlnBted ailver from coinage by the end of 1965, it !■ eat:
cumulative demand for ailver for all other Free World ule* would be
on ouncea <Z4D, ODD tona) by 1980. ThiB demand ia about equal to total
a of ailver plua nonproductive aourcea including the U. S. Traaaury at>
■dbyGOOgIC
344 COINAOE ACT OF 1905
foT induitry knd othat Free World coinsga. However, ahould lbs United StkUl r
rate of new lilver will be iwceliary in the next decade than hat been the caae in
productive lourcei of (ilver. The aourcea include atocka held by the U. S. Government
and foretingDvernmcDta, including thoae of the Commuaiat-bloc countriea, lilvar a*
U. S. Monetary Silver . The moal important of theaa ■loclii li the U. S. Treaaury
aupply of monelary lilver. A> ahown in Table B-6, thii alock conaiata of ailvar bullion
and ailver doUara, which aerve to back lilver certificatea In circulation and provide the
raw material for manufacturing lubaidiary coinage. Silver not needed for backlnf of
ailver certificate! ia termed "free lilver" and ia made available to the Mint /or aub-
■Idiary coinage aa needed or to private induatry. Table B-6 ahow* that the (tack of
ailver dollara, which waa at a level of 242 million ounces in 1950, has been almoll en-
tirely depleted. Silver bullion baching ailver certificate! la eatimated to be at a laval
of 1, 190 million ouncea at the end of the calendar year 1964. Inventoriaa of (ubaldlkiy
Table B- b .howa al*o that the total itock of monetary lUver held In the Treasury
roae from about 1,9B0 million ouncea in I9B0 to a peak of aomawhat leii than 2 , 1 1 mil-
lion ouncea in 1958. In each year alnce 195S, outflow haa exceeded Inflow, ao that, by
the and e( the 1964 calendar year, the remaining ailver atocka atood at a level of about
1,200 million ouncea. Had it not been for Lend-Leaie returna, outflow would hay* nc-
ceeded Inflow during every year alnce 19$1.
Silver in Circulation . In addition to monetary ailver held in the Treasury, the
United Statea monelary ailver included 1, TOD million ouncei of lilver In circulation as
of December, 1963. An analyala of coin-loaa ratea, however, luggeala that only 65 par
Aaauming that ailver dollara are no longer in circulation, thia loaa rata auggests that
the total amount of silver in coina in circulation at the end of 1963 waa B36 million
ouncea, or approximately one-half that shown in Table B-6.
■Ia From U. S. Treaaury Stocki . Table B-7 Itemisea thi
.live to the Treasury stock during the fiacal years 1950 tc
Digitized byGOOgIC
COINAGE ACT OF 1965
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COmAOE ACT OF 1000
I '
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COINAOE ACT OF 106S 347
In the pk«t 14 yc*r«, th* prlocipiJ sourcai of dapoiit* have been:
Worn eoiu retlrod from circulation
Return of Lend-Leue lilver
The aecond item, return of Lend-Leaee Bilver, added lufaetantially lo the atocfc* between
t9SS and 1962. However, little more lilvar can be expected from tbl* louccc. In the
1964 fiical year, total depoiita into the Treaaury atocki from all lourcei eqaatled only
..t of Ihe withdrawal, from atock have been f
or coinage. Thcae withdrawale, a
Table B-T, ranged from 11 to 60 mlUloo ™
ace* during the period from flecal
d 144 million in Hical 1964. Silver-dollar «
'ithdrawali roie from 9 milUon
1 fi.cal 1950 to 50. 6 miUlon ounce, in flecal
1963. At preaent, 3 million
emsin of the itocli of lilver doUara, Some i
agenciee [1 lo 6 million ouncee per year), •<
jme of which ie returnable.
'. or eachu«ea for .il.er certifi-
catei have alio contributed lo thia deficit. Normally, theae withdrawal* could be ea-
pecttd to be between IS and 65 milUan ouncea of ailver a year from ihe Treaaury.
However, lince September, I9M, due to a peculation, ledemptlona have ranged from
Zl lo 44 million ounces of ailver per month, bringing [he total for the calendar year
1964 to 141 million ouncea. Thia cedemplion rate might be slowed in the future if the
proccdurea for redemption were changed.**
Other Free World Stocka . In 1963, imporlanl i
the Unlled Statea am
and coin a> follow*:
MilHona of Ouncea of Sil'
■ liver wa* held by Canada, followed by Japan and
Projected Change* In United Stati
can be jedeeved Pi«e1r tqr pp
< imlflcnei ice ikpoUied nil
Du,iiz=db,Google
COINAGE ACT OF 1985
expectuicy of thU itock ia Ucking. Baiora propoili^ * ■olutlos to tU* iltBatton, tlura-
(ote, it ii Important to eatabllah juat how adequkl* thia atock 1* to nuka up th* deficit
batwean projeciBd FrcB World praductloa uid projected Fraa World raqulranuDta of
(ilver. Thia lorecaat then lervea ■■ ■ foundotloD for avaluKtlng alt«rii»tlv*a for allevl-
For thia forackit, U. 5. production, cooaumptlon, utd itocki of ailvet cumol be
divorced from Ihoae of the other Free World countriaa. Bacauae the factera of iupply
and demand that affect the life axpactascy of theae atocka ara variable, it I* alio necea-
aary to prepare ■ number of foreceati haeed upon varying aeaumptlona of aun>lir and
demand. In thia way the riik of an erroneoue conclualon in the projected ad«quacy of
factore affecting theae itocka, thus auggaitiDg poaaible aolutioo* to the iilver problem.
Table B-B* le a projection of the life expectancy of the U. S. monetary atock of
er bsaed on alternative levele In the allver content of U. S. colna. Tbta foracaat
;he metal in induitry ami in the arta, together with decreaeing Free World Bilver
age in countriea other than the United Statee.** The uncertainty of projectl^ iiituM
ed Statee coinage ratea for thia act of poeeiblc condltioaa la reduced by preparl^
ecCiona for three eituationa: high, medium, and low rete* of coinage demand.
A. Free World allver production: increaie of 48 million ounce* per year
by l9tS (4. 3 par cent annual increiae, 19&3 to 1963, veraua 1.5 par
cent annual incresae, 1SS0-19(>3) ind Z8 million additional ouneea per
year of production by 1975 lannuil increaae of 1.6 per cent from 196B
to 1975) for a total of 76 million ouneea increaae per year b> 1975
(compared with an increaae in production of only 40 million ouneea
per year in 1963 over 1950)
B. Conaumptlon in the ar
at an average annual r
through 1975 leompar.
:eB through 1975
of coinage demand
at level of 1964 production
d( pnWliLe cDDdiaaii ud l> w HcmuLIr ibt ami UMjr ixHlMUiy.
Digitized byGOOgIC
COINAQ& ACT OF 1965
ition HI. Low Coinnge R»te - Cyclic down-lurn in coiuse demand
beginoing in early 19bB; demand dtapa from 208 million
ounces in 1964 to 77 millian ounce* in 1966: demand in-
creaiei from 1966 through 1975 at the projected rate of
le ■ilualion* are graphed in Figure B-6. In the
tal Free World deficit, excluding U. S. coinage
through silver certificate redemption!. Thi* p
average rates of redemption or sales of Treasi
transfer of silver to other Government agencies is excluded from the calculations. Al-
though these deposit* aad withdrawals may affect year-to-year changes in redemptions
of silver certificates, the total amounl of sUver involved is deemed insufficient to (ub-
stantially change the outcome of these projections.
No provision i* made in these projections (or redemption of aUver certlficale* for
speculative reasons beyond 1964. Should redemptions continue at the above-average
September-December, 1964, rate (due to speculation), the projected life of U. S.
Treasury monetary silver would be aubstantlally reduced. It i* usumed, however,
a Life ol U. S. Monetary Stock ot Silver
i foregoing assumptions nt>w serve as a framework for projecting the changes
S. monetary slock of silver from 1963 through 1975 as a basis for evaluating
'e coinage possibilities. The alternatives considered in Table B-B and sum-
In Table B-9 for high, medium, and low coinage demand are
(2)
Reduction of the sUver content of coins to 50 per cent
(3)
Reduction of the silver content of coins to 30 per cent
(4)
Reduction of the silver content of coin* to 1 5 per cent
(5)
Complete elimination of silver in U. S, coinage.
natives Z, 3, 4, and 5 assume no change in the present coinage system prior to
[nber 31, 1965.** Also, no provision is made for the minting of silver dolUia in
:hTgC
t pr^jincd Lme-mn Dtod or demind (« lUvB-coiulnliig wkUllur cHU.
coLia be mide bj tune 31. IMi, Iht Tieuny OKtu «rauM bi muidul liy sboil 3 y«i. U Hl«i «It Mlltly
4 liAn coinAge, uoder d*
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350
CWmAGE ACT OF 19SS
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^mi
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!=;;;;.:
5S
n
n
p
sHSSSixSSIH^^^^^^^-i'*^^'^^'^-
DigitizcdbyGOOglC
O0IKAO£ ACT OF 1965 351
life ol Ihe U. 5. r
TABLE B-9. SUMMARY SHOWING YEAR IN WHICH U. S. MONETARY STOCK
OF SILVER WOULD BE EXHAUSTED, DEPENDING ON THE
SILVER CONTENT OF THE COINAGE AND THE
DEMAND FOR COINS
. „t Com.g
t Demuid
Alternatlv* Silvi
of U. 5. Coins,
.r Content
Level
High Level - Coinage production 1?68 llbl 1971 1974f»' 197?'*'
300 millio
ZOO million o
1969 1971 1973 1976 1980
1973 1975 1977 1979
Digitized byGOOgIC
352 COmAGE ACT OF IQSS
APPENDIX C
COIN- OPERA TED DEVICES
CONTENTS
Kiodi of Device! . . . .
EUtct of Coinage Alloy on
Coln-Opgrstad Divlcas
Ba.*la of OpcrMloo of Coin-
Selecting Mechuiiima . ,
Phyiical Praperllei of the Preie&t
Silver Coinage Alloy
Behavior of Candidate Material* in
Preient Coin- Selecting Devlcei .
Alleroative Solutioni Relative to
Coin-Operated Device* ....
Evaluation of Proposed Solutioiw, .
■dbyGOOgIC
OOINAOE ACT OF 19«5
C-1
APPENDIX C
COtN-OPERATED DEVICES
KInda of Devlcaa
Coin-operated device* diapenalng a variety of gooda and aervlcea have bacon
onplBce in the United Statea. Two major catagoriia of coin-opaiated dvvlcai
eat, namely, me rchandiae- vending machlnca and tnachloaa parfoimlng a aei
8 rchandiae- Vending Macbioaa
The merchandia
drink*, food, pocket (
auch macbinea. ThI*
machlnea alone will ai
with $Z billion in 1957
e-vendlng machin<
iotnba, tea cube*,
erchandialng Aaao
mount to about $3.
ea, fam
clgare
y. Ace
elation,
B billic
Liliar to aU, diapenae auch i
ttet, and amall change for c
ording to atatUtlc* pr***nt<
, the aale* from merchandli
« In the 1964 calendar year,
ipa rating otha
ad by the
,e.v.nding
cept penny gum machina* and th* like; ■
aluga and prevent! all but a few of them
Theae devlcea are manufactured by thr<
order):
contain
from*
lemajo
a device that detect* varlou* type* of
.ctivatlng the dlapensing mechaniam.
r companiei, namely (in alphabatical
Coin Act
National
Raed Bit
:eptora. Inc.
Rejactora, Inc.
All the
imporUnt to
give an optin
device* i
point out
.um degr,
jperate
that thi
ee of pr
on the lame ptinclplaa, irtiicb af* diacuased betow. It la
laa devlcea aubject the coin to a aerlea oif taata designed to
otactlon Bgalnat aluga while accepting aU or moat of the
in the machine.
Service-Vending Machine*
ipenaed by automatic machlnea include a number of well-ea
telephonea and a number of newer onea auch aa automatic c
tomatic waahlng machlnea and dryara, dry cleaning, Juka h
la Ipin-bal) machines) are additional cxampla* of machine*
klao Included in thla category are the aeU-ierva collection '
Lie toll roada and bridge*.
■dbyGOOgIC
COIKAOE ACT OF 1995
Cola Beltetion. Many of th« machine! that perform aeivicef do not contain the
■amc highly (ophidlcatcd coin- (election devices ■■ aie used in the nuchine* which
diapenee merchanidae. Moat ol theae machine* (an estimated 800, 000), however, hav*
■imple devicea which will prevent magnetic materials and overeised aluga from enMrini
the coin ban.
The trend ia toward increasingly more selective coia-diacriminatlng devices In
service -dispensing machines. Th* pay telephones operated by Bell Telephone Coinpan;r*>
tor axample, have up to the present time accepted all diak-ahaped plecea of metal that
were not too large noi too small. Soon, however, Bell will Install selectors capable
of rejecting over 90 per cent of the sluga now accepted. An estimated 1, 000, 000 g^j
telephone a will be altered.
Effect of Coinage Alloy on Coln-Opetatad Devlcas
From thia brief deacrlptlon of the wide-spread uB* of coin-operated devicea In the
United Statea, it ia evident that conalderation must be given to the effect that any change
In the coinage alloy will have on the lodustTiea involved.
Although the entire buaineaa of theae induatriea i* conducted with coins, a change
to a coinage that cannot be accepted along with preaent coina will not prevent theae in-
dustrica from conducting their bualneaa. The principal conaequence of such a change
a loaa of revenue to the operBtora of "aervice" machtnea, and loaaea in gooda by the
The magnitude of theae potential loaaee cannot be eetlmated with any degrae of
To a vending -machine operator, a alug l> anything that can be aaed Inatead of a
genuine U. S. coin in the operation of bia machine, Thua, aluga may be braaa waahera,
steel disk., play money, foreign coina, altered U. S. coins (such aa a cut-down one-
cent coin), or counterfeit U. S. coins.
Siae. Several kinds of mechaniama are used to detect and reject sluga. The
•tmpleat of these ia a ailing alot on the outaide of the machinea, preventing the inaeitlon
of slugs that are either thicker or larger in diameter than genuine coina. Cutouta in the
coin rail inalde the machine can he deaigned in auch a way that underalsed coina will
fall through before reaching the actuating mechanism. Underslaed coins are also
checked In the weighing cradle (see below).
Magnetic Attraction . Another teat which the coin muat pass Is that It not be at-
tracted to a magnet. Any material that Is attracted to a magnet Is not a ganuln* U. S.
coin since neither copper-iinc alloys (pennies), cupronickel (five-cent coin), nor allver-
copper alloys (subsidiary coins) are magnetic.
Digitized byGOOgIC
COINAGE ACT OP ISSS
Weight . A coin that hag been (uccEiafully Inierted in the machine drops into ■
"cradle". The cradle performa * second teat for correct diameter by catching the coin
When the cola haa lodged properly in the cradle, it cornea to reit momentarily ai
the cradle, pivoted inan off-center poiltion, is tipped by the weight of the coin. It i>
here that the coin ia weighed. A small counterweight, carefully deaigned to permit
rotation of the cradle by the relaiivety heavy silver-copper coins, will prevent rotation
by coins made Irom light metals, auch as aluminum. The coin is thsn cleared from the
machine by various mechanical fingers.
Washer Catchers . At the instant the coin falls into the weighing and siaing cradle,
a small wire probe pokes al the center of the coin. If the coin is a washer, the wire
iductor. In ■ dislt-ahaped con-
field. The net result is that the disk la slowed down as it passes through the magnetic
field.
The degree of retardation in the magnetic field wiU depend on the product of the
density and the electrical resistivity* of the coin. When the rate of retardation is
measured, it is possible to separate the genuine U. S. silver alloys from cuprooickels,
brasses, broniea, stainless steels, copper, linc, and many other metals which might
liave pBiaed the test* for sise, weight, magnetic attraction, and absence ol center holes.
Kinds of Coin-Selecting Mechanisms
Some, or all, of the above~descrihed principles of operation of a lug- rejecting
With very (ew exceptions, every coin-operated device will reject slugs that
ted by a magnet. Often, those machines which perform services will depen
ng slot and a magnet as the only rejection devices.
The eddy-current type rejec
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COINAGE ACT OF I96S
,- INCLINED TRACK
■KEEPER'
(CONClNTRATES MAGNETIC
Pin.D)
rinURE C-1, EDDY-CORRENT TYPE OF SELECTOR (SCHEMATIC)
Digitized byGOOgIC
CODfAGB ACT OF 19SS
Phy»lc«l PiopTti«i of th« Pr«»«nt Stlyr Coto««« AIIot
Sinca present coin- ■ electing devlcea •itn to aepaiate ganuin* O. S, coinage fro
;i, it would be well U thli point to leviaw the phyeical propartiea of the 90 ailvar
:oppeT alloy now uaed for aubaidlacy coinage and the relationihip of thaae propurt
otn- selector operation.
Thus, we find that the alloy haa the following cbaracteiiaticai
lU Highdenalty
Denaity • 10. 3 grama/cabic centimeter
Weight of dime ■ Z. 5 grama
Weight of quarter = 6. Z5 gram*
Walght of half-doltai = IZ. 50 grama
(£) Low electrical rciiativity
Reaiatlvity = approximately Z, 1 microhm-cm
(3) Low realativity x denaity
Reaiativlty x denaity - Z. ! » 10. 3 = 21. 6 ™'°^°^"'
aquare centimeter
(4) Magnetic attraction
Nonmagnetic: will n
Behavior of Candidate Mate riala in Preaent Coin-Selecting Devicea
Lightweight Meula and Alloy
Alloya of aluminum, oiagnaslum, and titanium, known aa tba light tnetali, would
not be compatible with preaent coinage in today'* coin- (electing device*. They are too
light to permit the cradle to revolve when the coin reata in It. Probably adjuatmanti
could be made in the cradle counterweight to permit u*a of llgbtwolgbt coin*. A niore
aerioua difficulty, however, ariaea in the actuating mechanlama tripped by the coina
after they have left the (elector. Moat mectiaai(m( require a weigh) of 2, 1 lo Z, Z grami
dimee would weigh only 0. 66 gram. Even aluminum 25'cent piece* would be too light
A further difficulty with lightweight coinage might be encountered by motorUta
attempting to toaa their coin* Into a toll highway baaket-type counter on a windy day.
Much havoc could reault.
In general, therefore, light coina would eaua* coodderable Inconvenience in tka
coin-operated mechaniama. Alloying of the light metala with very baavy matala, aoch
as tantalum or tungaten, would be required to make tliem acceptable.
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COmAOE ACT OF 1«68
Mȣnetic Mettli Mid AUoy j
Magnetic matarlsti, that i>, materlkla attiacted to ■ magnet, would b« r*J*ct*d
by all addir-cur rant-type (elector*, all "alide-type" unlta found on many of th* ••rvlci-
parformlng machines, and all toll highway aelf-aeEva collection baakata.
Some of the common claaaca of mater Lala that would be attracted by a magaM an:
Nickel and many of lla alloya
Particularly important to note Is that the 40O-aerie> atainleaa iteela, which are prla-
cipally iron- chromium alloya, are magnetic. Moreover, cartain of the SOO-eariea
atainleaa ateela, noubly Type* 301, 30Z, and 304, become slightly magnetic when
coined, thereby making them unacceptable In many vending machines. On the otter
hand, very alight magnetic attraction might be uaed aa a meana of retarding the coin aa
It passes the magnets in the eddy-current section of the ■•lector. Thl* principle I*
the baala of a recent development by the Inlernational Nickel Company. Further dla-
cuaaion of this idea la presented below.
Metals and Alloys HavinH High Electrical Resistivity
s materials, almost all have higher electrical resistivity
[ product of electrical resiativity and dentlty tl *« Im-
• the coin-selector operation, it would be well to compare the candidate mate-
n this viewpoint. Table C-1 shows this comparison.
Du,iiz=db,Google
COINAGE ACT OF 1966
.■!■ and alloy* U*t*d tn Tabic C-1 hava beai
The matala and allor* littad id Tabic C-1 hava bean acrangad In aacandtng order
of the resiitivily x dansity product. PreienI lelectora in vaiullng machines can be ad-
justed to accept coin silver (resistivity x density = 2t. 6) and reject pure copper
(resistivity X density = 15.4] on the low side and copper-5 eIbc on the high side
(resistivity x density ■ 27). Is practice, the adJustmaDt limits may vary somevfaat.
The important coacluston that can be drawn from Table C-1 Is:
Of the mataiials with elactrical conductivity higher than that of
coin silver, only two basic type* are likely to pa»> the addy-
These two basic types are represented by aluminum alloy XZOZO and tho copper.-5 sine
alloy. Any aluminum alloys with resistivities of about 8 to 8. 5 mlcrobm-cm would
probably be accepUble, though there are few commercial alleys that would fit into this
class. Various alloys could be compounded, however. The copper-5 Einc alloy is rep"
as phosphorus, cadmium, sine, nickel, and mangancie. In principle, then, the ac-
ceptable range of resistivity x density can be obtained by judicial alloying of either
aluminum or copper to increase their resistivities, because both are lower in density
than silver.
A further discussion of modified low-reaistlvily alloya follows.
Metala and Alloys Having Low Electrical Re»i»tivlty
Except for copper, aluminum, and gold, no metals approach the electrical resis-
tivity of coin ailver. Zinc, nickel, iron, columbium, and sirconium have many time*
higher resietivKy than com silver. Because of this. It is not passible to match the
reiiativity ■ density product of coin silver with any alloy except one based en meMis
lighter than sliver. Evta gold (if it were a candidate) would not be acceptable because
of its very high density. Of the relatively light meUls, only aluminum has a low enough
resistivity to permit matching coin silver, with respect to eddy-current response.
lus section, the modified coppeta may ba suitable.
imercial ones aie ahowa below.
Chemical Resietivity,
DeoxidUed copper Cu-0. D2P 2. 03
Zirconium copper Cu-0. 15Zr 1,99
Cadmium copper Cd-0. 9Cd Z. 03
of additions to copper, which would give alloya having resistivities of
db,Google
COINAQE ACT OP 19«A
Wat^ht P«r Cant
Chromium 0. 09
Mftngnnsas 0. 11
Ickcl (0. 5%) might ■••o b« ua*d U
SilTT-CoypT Alloy . Tha clan o/ alloya rapreaentad b; tha ptaiant coin allnr
(90 ailvar-lO copper) can be made In any comblnattoD of lilver and coppec fcom 90
•Uvec-10 copper to about 95 copper-5 lilvec and itUt have tha reilitlvlty of coin ailTir.
Therefore, the eddy-currant reaponae among a broad range of allvar-copper compoai-
tioni would be accepUble,
It (hould be noted that varioua atlver-copper alloya have baan u««d ta odtar
countriea, Howavar, when the almpla 50 coppar-50 ailver alloya have bean adopted, It
ha* bean found that diacoloiatlon waa a problem. Solution* to thl* problem have In-
volvad additional allDying with sine or nickel, iiWch not only tanprova tha corroaion
raaialance but alao obecure aome of the pink or yellow coloration due to the copper.
Below are aeveral example! of copper-atlver alloya that at one time or another hava
bean adapted by foreign government*:
Country AUoy
None of the above alloya have realatlvltlea low enough to permit their uaa in tha
■ ent-day coin aelectora baaed on eddy-current reaponae. Eeientially, the Increaaa
eaiativity produced by ihc addition of nickel or nine to the coppar-gllver cooiblna-
B la tha aame aa that produced when theae additlona are made to copper alone.
In lum, only the following claiaCB of alloya would be aatiafaetory In their eddy-
db,Google
COINAGE ACT OF 19fl«
Pll><
itlc. «ad cer
amici
ibothfaa'
In pre.ent
edde
^r la the
i poislbUi
ity ol mrtlDg
r plaitic mai
devlopm.
int( would ra
qulp.
a conaic
Sumrnxn
AccepMbl*
MaU
rlala
DfUtlDg of low-ratlitlvity meUUic
It orarcomB *OIna of thaae problam
rabla amount of reaeaTch to bring t1
ght me tall
1 - aiumini
n - would not t>« ace
optabl.
: metal* o:
r aUoy* wc
mid not be
«:cepUble
llatlvitym
etal aUoya
would not
: be aci
:eptable
aandplaa
tlci would
not be ac<
:eptabl
e.e re.tn,
:tloaa, the
only acca
ptable
alloya <
a Modlflad coppata
> SUvar-
■coppoi alloya.
ttvei. Public acceptability la one criterion. Would a copper -colored coin be acceptable
at a dime, quarter, or half-dollar? Becauae of th« past aaaoclation of copper-red
muat be voiced that auch alloy* would be acceptable a* hlgb-value U. S. coinage.
Wltb the copper Uloyi, the Incentive for illegal duplication i* high. Moraover, an
Increaie in *lug making 1* po**lb)a beeauia of the Inccaaaad public knowledge that
modified copper* will actuate coin-oparated device*.
Silver-copper alloy* pre*ent other difficultlea, ■(*oclated with th* *upply of *llveT.
If the coin muat be whlte-colorsd ■■ well a* corrosion rOBlitant, It It eitcamely doubt-
ful that any coin vltb lex than SO per cent allvar can be a aucceaaful aubatltuta for
pretent coin (liver, Sub*tltijtloa of a 50 *llvBr-50 capper alloy for coin allver In all
denomination* of coin* will not be po*Bibls on Dthar than a temporary baala. * Condd-
eration mutt be given, therefore, to the poaalbillty of *ub*tltutlDg 50 *Uvac-50 copper
for only one of the denomloatloDi. If thli war* faaalble, the problem of aubatttute alloya
for the other two denomination* atUl would remain.
Poetlble alternative aolutiona are dl*cu*aed below.
■dbyGOOgIC
COZNAQE ACT OF 1905
AlternaUve SoloH^i RtUttva to Coto-Op«r«t«d D
[oachei are pi
aiiible. Eithei
t . complete r
lew deiign work
U. Tha., 1
,ta.pU.dju,bT
lenti, k> prog
■nd cupronlckel
loi
le lome of Ita Kileetlvlty i
tad woold .leo <
i.ibly other
kUoyl. Eitlnij
of
■ enaitivlty i
■ beyond tbs ■
.cop. of tbta iti
The lecc
.nd .ppro.ch,
th»t of m»klng
modification tt
etura of the dev
AttTMttve 1. Modify Coin Selector.
Can the nuuuifsctucer* of th* vsrlou* typaa of coin ■■lectori modify thnn to tc-
cept oHur coinage? Undoubtedly, the answer would be yea if only n»w-colfiAg« ailoya
were under con aide ration. Preiently, for example, the eddy-cuTTent typaa of aelactara
can dlatlDgulah between genuine U. S, five-cent piecea and varioua typea of *luga. In
Japan, a pure nickel coin ia dlatlngulahed on the baaia of tta unique magnetic ck&arac«
tariatlca. But the problem of deaignlng a coin aelector that would accgpt both tha
e modification would be mad* by a
Both of tluae approache* have pit-
prahended, could indeed be nude to
kel; but, if thia were done, tha device would
aise*, line, nickel allvera, and
itlmallng the riaancisl loaaea cauaed by thla lack
t ia clear that aoma loaa would
, the poaalble dlaturbance to the Industry cauaed by tha
E more aerloui than the direct coat. Immediate cbanga-
;annot be aolved by uaing a alngle metal
or more metalj in Juch a way that each
CTant function, while tba compoaite meet*
nple 1b copper -bottomed ataLnleaa ateel
cry realitant to corroaioo by food and
Therefore, in atalnlea* ateel cookwara.
Copper, a good conductor, 1* applied to
the bottom, which cauaea the heat to aptead evenly and preventa acoiching,
Thia principle can be applied to the coinage problem. We are confronted with the
problem that the only alloya with low realitivity (beaide* the ■ liver -copper aUoya) ar*
either too light or ate red colored. The aolutlon is then to make the light alloya
heavy by combining them with a heavy metal, or to make the red alloya white by cov-
eltng them with a white metal or alloy.
The poaaibilitiea of combining aluminum alloya with heavy elemant* ara vary
in North America. Another heavy element, apent uranium, ia rulei
emotional effecta it might have on the public. Accordingly, compoi
aluminum are ruled out.
An
englnea
rinl
irlala
proUem tl
iloyi
la often
roHchi
=dbY
nt of the
tion pr
the
■all requ
ilrei
. An
everyday ,
poti
1 and
pane for
[Jking.
good.
condu.
:tor of heai
hot
apota
might deve
lop and ,co
rch the foo
db,Google
COINAGE ACT OF 1966
Varloui ways o/ maklni capper appeal wlilta ata kaowii. It can b< plated with
nickal, «llvar, or a Dumber of altoyi, Silver-platad coppai alloyi could be made to
look like pretent coinage and act like present collude In the vending machine*.
Aaolher way ol making a white -looking capper alloy la to make a imiltilayei ahaet
from which blanka would be cut foir coining. The multilayer would conalal of a while
metal covering on both aldei of copper or a copper alloy. In principle, the copper,
having low r**l(tlvtty, would provide the eddy-curreat reiponae, while the outer layer
would provide the white •ppea.ranca. Actually, the eddy-current reaponae depend* on
the particular combination of metala and their relative proportioni. A cuproolck*!
(TS copper-25 nickel) clad on copper in the proportions ihown in Figure C-2 has been
found to behave aatl (factor Uy In the •ddv-cucrent type of coin lelectoca.
FIGURE C-Z. MULTIt-AYER BLANK, Z5-CENT SIZE
90 aUver-10 copper
75 C6ppeE-Z5 nickel
70Copper-iO ellver
98 Copp«r-Z line
Various illver-copper alloy*
7S Copper.-Z5 nickel
It compoalte would behave the eame a* the prc*a
Ion* of clad and core. The lait two would con*e
outer edge rather than red, aa ahown in Figure
coinage, regardless of the
e silver but would have a white
-Z, which would be the case
The disadvantages associated with thia approach ai
if the mantafacturtng varlaUe* has nM been made and (Z) the Mint ii
nanufactuM such a material, so industrial sources mus
compute inveatigation
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COINAGE ACT 07 19«S
C-12
A third appruch, twaad on tha philofophy of compoalM*, !■ a p
■natallurglc*! on*. It might b« poidbl* to maks a mimurs of powden
In a whita-znatal Tnatriji auch aa cupronickal. If apeclal procaduraa 4
caraful choice of matrln material* made, the rcault would b* a compoaita conaiatln|
ci a diaparalon of low-raalativity metal la a white matrix, Figaie C-3 la a ■chomatlc
diagram of a powder-metallurgical compoalte.
The feailbUlty of thla approach hai recently been damonatrated by the Kaweckl
Chemical Compasy, ual&g a columblum matrix. Several mootha of develDprnant work
would be needed to eatabliah nujiufacturing parameteia. Mint production of coin blaAka
by compacting and alntaring would be a vaat departure from preaent proceaaaa, but
thaae proceaaea could be Incorporated In the new Mint. In tha Intailm period, the Mint
would have to purchaae blanki from industrial auppliera, though the lead time required
for the production ratea needed will bci on the order of 6 to IS montha, A complete coal
or technical evaluation of Chii approach hai not been made at thla time, but Indicatlona
are that (he coet of the blended powder would be about $15 per pound, and blanka per-
hapa $20 per pound.
Alt
rnative 3. SliRhtly M-Bnellc Male
rial.
bas
A third alternative haa been pro
eddy-current aection of a
to the magnet, Ai the fac
the resulting frtqilonal dr
been retarded by the eddy
oaed by the Int
Din rollB paal ti
oin selectar, tli
of the coin rub
B slows up the
nonmagnetic material (95 Blckel-5 silicon) that hai been clad to
(80 niGkel-16 lron-4 molybdenum). The magnetism of Permallo
very cloiely. Only 1. 5 per cent of the thickneia of the £5-ceDt <
il Company. The
refully controlled da-
Ite conalallng of a
. Permalloy core
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COnfAGE ACT OF 106«
365
Permaltoy,' which i* lufficient to produce the effect dailied. The Inter national KIchal
Campnny hx propoted thai • piece of epecial tap* b« applied to the magnet polea of the
tent to the eddy-cnrrent retardation.
Became tbla method depend* on friction, th* rim* of the coin* would have to be
redeeigned to give a uniform rubbing *urface. Oth*rwl*e, wear would progreialvcly
alter the action of the coin In a coin aelector.
This compoilte wa« developed a* a temporary coinage material that would be
acceptable in coin-operated devlcea along with preaent colne. After the operator*
of coin-operated devtcea have had a chance to adapt their device* to accept colna with
either high or low leiiatlvity, the magnetic core could be eliminated. The nlckcl-
S alllcon alloy would then be accepUble to all coin-operated device*.
An advantage of thia proposal !• that the compoaite la an all-white combination with
■ good appearance. The core makea up only 1. 5 per cent of the croii-iectlonal area,
and could Oierefoie, be abollahed (at the appropriate time) without any change in
:oin-operated dcvlcei. Becauae the principle of operation
!her than eddy-current retardation, more problem* can bi
Lpoalte than from the muttllayera, whose operation ia bast
Pioblemi with wear of the coin, magnetic field variation,
lent devicaa, which would be minimal with the multllayera
T, would be troubleaom* to the nichel-S a U icon- magna tic
ir, the Mint would be required to purcbaee the composite,
o make It.
Evaluation of Propo«ed SolntloB*
would not be well ri
I Silver-so copper alloy
ultllayer materials con*l*ting of •ilher cupronlckel on copper, or
iricnii other combinations of ailver-copper alloya, copper, modified
ippers, and cupronlckel.
case of the 50 ailver-SO copper alloy, *ome difficulties can be expected In
sing. Basically, however, the manufacture of this alloy should be within
capabilitie* if minor change* in equipment are made.
ultllayer material* described are preferable to the composite Involving a
re. It would seem that if a compoaite is to be made at all. It ahould be
eddy-current principle rather than othere. On the other hand, if the vlalbl
lntc'*<-abl* in the fltM caae and combinations of white alloys are not feaalbl
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COINAOB ACT OF 1»«S
The principle problem* yet to be fully etUbUtbed lalmtive to the other multUayet
(1) SouTcae ot aupply of multUayer mMerlala
(2) Manufacturing tolerancas by auppliera
(3) Quality control Id the Mini
Some e0ort ha* been devoted to thaae problema, but more work ahonld be telle
before a change-over to multilayer material* 1* undertaken.
One solution which would ua* a limited amount of ailver i* to clad copper wltli the
Swedish alloy (50 copper-40 gilver-5 nickel-5 zinc). Thii ailver alloy woold ba
preferred to the 50 gilver-SO c(q>per alloy becauae of somewhat improved tarnlah
Before daclding on copper aa the core compoaltion, anothat factor to conildar ii
that the aonealing temperature of thla metal la much lower than that of die clad. Thai*
temperatuiei ibould be a* close together a* posaible. The addition of ZS to 30 troy
ounces of silver per ton of copper^ or 0, 1 per cent airconium, will raise the hot
working and anoealing tvmperati
tlon of about I per cent line wil
discrimination of the coin selec
Accordingly, the foUowinf
all denominatioi
{11 Chemical Compoi
Outside layers: '
irlng copper (£5-30 oa/ton), containing 1 per cent alnc
mlnatton
Over -All Strip Thickness of Thickness of
Thicknesa, Outaide Layeia, Core,
inch inch Inch
0.0134 0.0402
0.0104 0.0312
0. 0078 0, 0234
Digitized byGOOgIC
COXNAOE ACT OF 1965 367
idC-16
: cent by weight of the <
Tbi( combliutioB could ba cluiigad to euproi
cbajiglsg th* thickn****!. If the t per c«nl cine ii
change In bahavLoi In coin ■•lactoti will occur.
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COINAOE ACT OF 19SA
APPENDIX D
MINT OPERATIONS
crlption of Mint Operationa
ilts of Coin Striking TrUla
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COINAOE ACT OF 1906
MINT OPERATIONS
An important criterion which must bs uied In rating a poi*lblc alternative it
teriol for the current coinage alloys la the abUlty oC fbt Mlnti to mske calm from
material.
Congreai ha* recently authoriiad a new Mint, to be located in ch« city of
Philadelphia. The new facility will Incorporate modem melting, rolling, annealini
coining machinery capable of handling a number of the alternative materials that n
selected for new coinage. However, the new Mint is not expected to go into produi
for several years. As a result, the present Mint facilities must handle the produc
of coins from the new material until the new Mint is ready.
The Mint has for years been an integrated opera
control of all aspects of coinage f
including final inspection, count in
These aUoyi are processed through the Mint as shown in Figure D-1. Each
the PhiUdelphia branch of the Mint, but the Denver branch has essentially t)
In the Mint melt shop, the required amount* of metal for the alloy* usei
[hed out and charged cold into 750- pound- capacity high-frequency inductii
a. Each unit has an available power supply of ZOO kw. Clay graphite fun
generally preferred, particularly for the current silver alloy. During re
ration, the melting and casting facilities have been devoted exclusively ■□
er-IO copper alloy. There is not enough capacity to handle the melting <
.age alloy* at thi. Umo. The result 1* that coiled alloy strip, required foi
Molten silver coinage metal is cast into rectangular slab* in water-coo]
d "book" mold*, yielding on ingot 1-1/2 inches by 9-3/S inches* x 5 feet 1
about 31S pounds. This slab ingot require* no *urface preparation, other
>hing, and goes directly to the rolling mills for a cold reduction pass.
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370
COINAOE ACT OF 19«B
<9S% Cu-5*Zn)
(75ftCu-i5% N
1 M.l. 1
1
1 c. 1
1 Rol tSAnMUl
1 BU.» 1
1
1 cle>n 1
1 Riddle 1
1
1 o-!" 1
1
1 C.1, 1
FIGURE D-1. BASIC MINT COIN PROCESSINC
Digitized byGOOgIC
OOINAQE ACT OF 1965 371
D-3
The Introduction of klterutlve maula a&d alloya luch >■ nickel, nickel-
chromium, or itainlega ileel* would require a chAage in melting praclice »nd diffsrenl
ment to ■■fely and efficiently handle the higher- melting- point materiali. A much more
draatlc change would be nece((a.ry were the Mint required to melt and caic the ao-
called refractory or reactive meUIa auch aa titanium, siTCDDium, or columbium,
by gaaea luch a* oxygen and nitrogen muat be kept at a minimum becauae auch con-
tamination, even in amall amounta, ahaiply increaacs the hardness and decreaaea the
workability of these metala.
Of the metala and alloya already auggeated as poaalble alternAtivei for 90 sllver-
10 copper, the ouprooickel, nickel ailver, and various ailver-copper alloy modification i
arc the only white alloya that could be handled in the preaent melting equipment. Moat
copper-baae alloya could also be handled. The melting and caaUng of the preaent silver
aUoya at the Mint haa reached a high degree of perfection and efficiency, and the
product ia conaiatently of the highest quality aa is evidenced by the excellent coins that
are made from the ingots.
The Mint ia preaently capable of cold rolling such alloys as cupronickel, 90
heating ingots or slabs to hot roll them. A furnace for annealing between cold reduction
passei ii available. For example, the current high-silver alloy i> rolled Co size with
two intermediate anneale with about a id per cent cold reduction of the cast slab before
the first anneal. The cold rolling to final sise prepares the strip [or blanking, which
diCCiculty. However, alternative alloy*, sur
alloys including nickel-5 silicon, CiUnium,
techniques and equipment not now available
sirconiurn, protection from gaseous contamination would be required during annealing-
Columbiurn, on the other hand, docs not work harden rapidly during cold rolling and it
could perhaps be reduced without intermediate annealing. However, it ia probable that at
or alloy were chosen.
In connection with rolling operations, a smooth, clean surface is required to pro-
duce high-quality coins. With the present alloya, a good surface li maintained without
any special descaling or pickling steps. Some of the alternative metals and alloya might
poae a problem in this respect unless the Mints bought the material from ouleide ven-
dors rolled to the final finish and siie desired. It is doubtful, that tbe Mint's rather
old rolling equipment could properly handle most of the alloys which have been auggeated
aa poaaihle alternatives to the current ailver alloy.
!d by cold rolling
; and annealing with ni
aa the stainless
ateela, the high-niek«
id Eirconium wo
uld require rolling
the Mint. Specii
il annealing equipmen
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372 COINAfiE ACT OF 19S5
Attec the colD meul i* rolled to the proper thickiwiB, it la lent through the coiii
bUnkini machinsi, which puDch oul the coin blanki or plucheta. With the proaant
alloya, thia ia done with the atilp in the cold-iolled condition, aa tUi r«aulla in the
blank having a clean and aharp iheared edge. If annealed before blankiBg, the puitch
draga the metal and leavea an unaaCiifactory burred edge. Although the blanking step
preientt no particulkr problemg, aoma of the poaalble alternAtive metala may be mora
difficult to punch, with Ih» reault that die life would be ahortened.
The blanking aperatlan produces about 30 per cent acrap, the inevitable reault of
blanking acrap preaenia no problema. Scrap from each of Iba alloya ia <or cao ba)
readily reverted into the melting cycle. However, with certain alternative matarlala
auch aa a coRipoaite made by claddlag cupronickel to a SO allver-fiO copper cora, the
blanking acrap could not be limply ramalied. In a caaa of thia type, it would be nacaa-
Tbe aeparation of theae metali, however, la not difficult. The monaUry value of the
chargeap On the other hand, scrap from a compoaite of cupronickel clad oil copper
could be reverted directly for production of the preaent 5-cent coin or for pToduction
acrap would have to be carefully segregated ajid ralurned to tba outalda euppllar for
remelting and reproceeaing. The reproceialng coata would be relatively high for theae
metala, perhapa aa much aa 75 per cent of the original coat of the rolled product*
ling operation, the coin blanke or plancheta are paaaed between rolla
the rim of the blank. The rim thickneaa ia greater than that of any
:oin, providing tome protection againat wear of the central porUona of
e long aa tbe rim i« thu* ralaed the coini will "stack" properly.
}ining process is a critically important part of the total Mint operationl it
'ery real teat of any material auggeated for uae in coinage. During the
'ation, the coin blank is pressed aimultanenusly between obverse and revere
I (he complete design, including the milled edge ("reeding") when the latter
pair of dies, so thai one stroke of the press produces two coins. Coinage
rate at about 140 strokes a minute, so that each press can produce about
, nickels, or dimes per minute. The quarter dollar and balf-dolUr, being
ea, require more pressure for coining and only one coin ia produced for
id limited in capacity.
essea i* 150 tone.
of, their rated load.
■dbyGOOgIC
COINAGE ACT OF 1986 373
The Introduction of new coinage alloyt of higher (trenglh and hardness than the present
alloys could impose a severe strain on the prisaes, even for the sRiall-aiie coin*.
This might mean Ihat only single-coin dies could be used instead of dual onea, «ith •
resultant lowering of production rate. Larger coins such as the half-dollar may be vei
difficult or even impossible (o coin from high- strength material on the present equip-
ment. For example, difficulty was eiperlencei) when the Mint made coins for Coau
slve wear and possibly cracking would be the result of using harder <
t materials that require high coining pressures. This would cause i
ot only ai the result of higher stresses imposed on the old preaiea,
of the need lo replace dies more frequently.
mlts of Coin Striking
A number of Che possible candidate materials were s
Philadelphia Mini in the form of rolled strip to determine ]
blanked, upset, and coined. Table D- 1 lists the materials
resulli. The rolled strip material, in (he proper Ihicknes
desired, was first blanked and upset as in normal Mint pn
step, special dies were prepared by the Mint designers and engravers, which would
duplicate as nearly as possible both the obverse and reverse design features of a typical
much lower than that In the "knuckle" presses normally used for coining, which might
The materials chosen for the Mint tests were representative of the classes of
materials listed in Table i in Ihe main body of this report. Some of the metals,
coinable. Cupronickel, for example, was familiar lo the Mint as the alloy used in the
and half-dollar sizes. The various silve
resented dilute silver alloys that are w
under certain qualified conditions, were considered as possible candidate materials.
The nickel- base alloys were represented by Monel and a special nickel-5 per cent
silicon alloy containing a Permalloy core. Austenitic stainless steels were represen
by Types )01 and 30Z.
The data in Table D- 1 show that there was no difficulty in blanking any of the
materials. However, coin blanks of some of the materials did not upset properly
during the edge-rolling operation. For example, two of the composite materials, the
silver- clad copper and the cupronickel- clad copper tended lo buckle during the edge-
rolling operation. The problem was more pronounced with the quarter- dollar-sire
blanks than with the 10 cent size blanks. Photomicrographs, Figures D-Z and D-3,
show that the bond between the outside layers and the copper successfully withstood
the blanking and upsetting operation*. The cauae of buckling may have been
lected and taken
to the
[>w well they could be
md observations
on the
for the particuU
ir coin
;Uce. For the at
:toal CI
lining
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374
COINAGE ACT OF 199B
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COraAGE ACT OF 1868
COINAGE ACT OF 19SS
rected eaaily by proper ■■lection of Ihe annealing condiliona. It waa alao noted tlut the
edge-rolling operatloD cold worked the edge of the blank to • great*! depth thui antic-
ipated. During the auh^equeDt cotnlng operation, tbia condition appeared to cau^e
trouble in getting a full development of the lettering In the deaign that 1* adjacent to Uie
rim ol Ihe blank. Thli condition wai particularly aevere In the auitenltlc atalnlei^
■taeli and the nickel-5 lUlcon alloy. To alleviate thii would require an extra — — -n-g
traatmaat after upiettlng or edge rolling to aoften the rim of the coin. To prevent
buckling of the blanka during upiettiag, it would protiably be better to uuiekl following
the upsetting, rathsr than before. Thie would al^o aoften the material in the outer
portion of the blank. Thii procedure wai actually tried with another aet of the nickel'
Figures D-4. D-
5, and D~6 ihow the reaulta of coiit-itrUdng wtperinuBt*. The
thealteruilivB materia
Icwa^ eatabllihed by trial* with the current aUver-bai* alloy >•
• ■tandard. A* a re>u
It. some ol the »llernaav=. might have ahown up more favorably
If higher preisurea hai
) been employed during coining. However, aa Indicated earlier,
the cold work introduci
ed into the rim area of the coin during edge rolling remlu in a
low capacity for plastii
: flow in this region during coining. Thi. deficiency ml^ be
mitigated by annealing
the upset blank before coining, aa waa done with the nlcksl-S
In general, it may be concluded that the atainleaa Steele, whether they are the
auatenitic or the straight- chromium types, would be difficult to coin with the present
equipment. On the other hand, a stalaleas steel has recently been developed by
Republic Steel Corporation, which promises to have higher colnahility than the other
stainlesi steels. The alloy has not been tested in Mint coining dies, however. Nickel-
chromium alloys and Monel also lack coinability. However, the lack of coinaUllty of
moat af thr.e alloys would b= only one part o( the Mint's problem. Aa mentioned
earlier, these materials also require dllferent melting procedures than used with
present alloys, and they require hot-rolling equipment. Furthermore, annealing of the
austenitic stainlegs iteeia requires fairly high temperatures (about 1900-2000 F),
followed by a water quench. Such facililiea are not now available. Nickel, nickel
•ilvera, and the nlckel-B silicon alloy are not aa difficult to handle as are the stainless
steels but, with the possible exception of nickel-silver alloys, the Minte are not now
equipped to handle their melting and rolling.
n was found to be questionable, and further experlmen-
m was not tried al the Mint, its properties indicate
^n well established by the Canadian Mint, which nnr
' nickel. Thus, from the standpoint of colnahility, the
kel, cupranickel, columbium, the eilver-copper alloys
posites consisting of cupronickel clad on copper and
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75 Coppor - 35 Nickel
Cupconicltal - Copper Multllayor CooipoaiM
SOSilvsi ■ 50 Coppar
Co!d Silver - Copper Multilayer CompaBiCe
378
COINAGE ACT OF IBSS
101: CDhunbium, Vaadorl
110: Colomblum, Vandoi n
lOT: Zirconium
105: MebbI
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COINAGE ACT OF 1965
I08C; Nlcket-5 Slllcoa with magnetic core (bright annealed after
upieuing]
G; Type 301 SUinlei* Steel, Vender I
106: Type 301 Stalnleii Steel, Vendor II
109; Type 302 SUlnled Steel
48-988 O— «■
Digitized byGOOgIC
CODJAQE ACT OF 1985
The resuLtft of the blanking, upsetling, and coiidng experiment*, considered In
inction mth the other Mint proceiaea, lead to tk* |eiMral rati